5 tips for small businesses, MSMEs to use money efficiently and grow faster
Money is crucial for the success of any business. SMBStory spoke to industry experts, business coaches, and entrepreneurs to laid down five useful tips for small businesses and MSMEs to use money efficiently.
MSMEs and small business entrepreneurs who fail often don’t understand cash flow. They fall short of money to get back into business, thereby hindering the growth and scaling-up opportunities. Recently, during the COVID-19 pandemic, many entrepreneurs had to face such tough battles.
Therefore, SMB and MSME entrepreneurs should know and understand some important tips to use their money efficiently and grow the business faster.
SMBStory spoke to industry experts, business coaches, and entrepreneurs, who shared five useful tips to use money efficiently in business and grow faster.
Cash forecasting is one of the most important aspects of running a business, which estimates the flow of cash in the business.
Ratish Pandey is the founder of Ethique Advisory, which provides business coaching and consulting services with a focus on “customer-first”.
The business coach says a rolling 90-day cash forecast gives the entrepreneur a heads-up on how much revenue will be needed to manage the expenses.
This, in fact, enables effective planning — whether it is working at reducing costs or improving the Days Sale Outstanding (DSO’s), which results in better cash management — freeing the entrepreneur from the worry of timely payment of salaries and other expenses.
To overcome the cash gap challenges, Ratish suggests entrepreneurs should focus on reducing it by negotiating payment terms from debtors.
“Pursuing and recovering the money in time will be very helpful. Also working with the vendors on the payment side, releasing working capital, using new-age tools, like bill discounting, and getting specific funding for raw materials (specific to manufacturing companies) would be extremely helpful in reducing the cash gap,” he explains.
According to Ratish, scrutinising operational efficiencies to minimise errors will also help in smooth cash flow.
Sumit Agarwal, Founder of Vyapar — a business accounting and inventory management company for SMBs — says entrepreneurs do not pay enough attention to unnecessary expenses (where the major chunk of the money goes) when a business is running smoothly.
“Tracking everyday expenses is important in a business. This can be done in two ways — manually and digitally. A digital tool will help ease the process, where software can track weekly and monthly expenses and omit the unnecessary ones, saving a lot of money, which they can use in other important operations,” Sumit explains.
Weeding out extra business expenses ensures liquidity in the business and grows faster, he adds.
Reduce unnecessary marketing expenses
Sumit says that entrepreneurs should reduce their costs on marketing that are not fetching them results. Citing an example, he says,
“We see banner and hoarding advertisements and also some entrepreneurs distribute pamphlets to promote their business. These are good ways to build a brand recall but not good enough to track and generate leads. One must invest in marketing that generates leads.”
He emphasises that entrepreneurs should focus on online advertising that promotes their online store or business directly to the target market. This will help them save a lot of costs, which they can divert in lead generation marketing.