We are a unique SME focused accounting firm in UAE and it been few years that we are doing accounting work for clients in different industry. We provide them with different packages so that they can pay only for what they need. While we see owners really focus good amount of their time and energy on sales. Then later they focus on business profitability but they kind of ignore were important aspect of business which keeps a business alive. That is CASH.
Business Process Outsource
Kindly us tell few important tips to avoid cash wastage as SME business:
1) Keep Investment within the business optimum:
a) Receivable – Keep track of your receivable. Depending on your type of business and industry standards keep payment cycle as small as possible. If you are giving credit of 30 days. Be sure to get your payment on 31st day. Don’t let it become 45 or 60 days as it hurts your cash flow. Compensate clients if they pay early. You can give them discounts, extra service or products, gifts etc. We help our clients in receivable management. Do connect with us if you would like to understand more about it.
b) Inventory – Keep inventory at optimum level. Don’t block too much money on inventory. Although inventory management is a big topic which cannot be covered in this article. But just need to be mindful of that how much inventory you hold or how much can be reduced so that business is not hurt. Try to have back to back agreement with your supplier. Which means when you get order you can order to your supplier.
c) Assets – Keep low on assets. Try to see if you can lease car, machines, office etc. It’s always easy to leave leased things during difficult situation. En-cash those assets. See which assets you have for just the pride of owning those assets and in reality there is no use of it. It is no rocket science to know that it is not easy to sell your assets quickly in tough times. In situations like Pandemic cash was the only thing which was useful. If you try to sale your assets in such a situation to get cash to sustain your business than it’s actually very difficult or near to impossible.
2) Have good control on expenses of business:
a) Keep business and Personal cash separate-This thing we recommend to all the startups that connect with us for their accounting. It is very easy in initial days of your business life to do this mistake. It finally leads to situation where you feel ‘I don’t know where the cash went’. If you feel that you need our help with your accounting process so that we can guide you on expenses management please connect with us here.
b) Outsourcing- These days so many business tasks can be outsourced. Right from content creation, website, marketing, PR, customer service, sales, cleaning, accounting, taxation. Keep in house staff will cost you visa cost, gratuity, leaves pay, electricity, water, stationery, telephone bill, office space and finally salary. Save cash on all of these. Also with outsourcing you cost can be variable. When you feel you want to have more services you can spend more and when there is lesser need than you can spend lesser on it.
c) Instant Buying- Some people buy things very quickly and some take time. If you are amongst the one that has habit of buying things instinctively then you may end up spending valuable cash on not so valuable stuff. Just tell yourself I will buy this latter and walk away. Most of the time you won’t go back and buy that stuff. If you still need it you will anyways go back and buy it which is fine.
3) Learn to Manage you risk:
a) Have cash for 6 months always- write it down on excel how much exactly is your yearly business expense in total. Please be realistic!! While you are building up your saving always keep nearly 6 months worth cash in such a way that you can easily access in difficult situations. Also you use them only and only in difficult times.
b) Insurance-Well you may not know what life brings to you but you can be prepared for it. Insurance is one such thing. Insuring your health and other valuable assets can keep you cash healthy in difficult times. So if a situation arises where you are low on cash and if someone in family gets sick then you don’t need to worry about hospital bills at least.
Remember this proverb as this is very useful in current situation.
Sales is Vanity
Margin is sanity
Cash is King.
Thanks for reading the article. We are an outsourced accounting and tax consulting firm in UAE. If you are looking for our services and want to know more about us do connect with us at https://accountantsbox.com/contact-us/