As an SME owner, it’s vital that you keep a tight control over your business’s finances. Many SMEs fail because they’ve failed to accurately control their cashflow, and it’s easy to see why. After all, with so many expenses and expenditures, it can be difficult to see whether you’re coming or going, sometimes.
The trick is to correctly control your working capital (something that’s detailed in a Market Invoice blog post here). By controlling your working capital, and being careful with your money, your business will stand a better chance of success. Let’s look at why your business should be careful with its money.
Uncertainties Over Brexit
We’re currently living in uncertain times as Britain looks to renegotiate its exit from the European Union. Prime Minister Theresa May wants to trigger Article 50, which will begin the process by the end of March.
However, it appears as though we’re at least a year away from knowing what “Brexit” will look like, and the impact on SMEs could be large. With so much uncertainty both politically and economically, the value of the pound has fallen by around 19%.
This means that your business’s money is worth less than it once was, so consider spending it carefully. By reducing your expenditure, you should be able to survive many of the uncertainties over Brexit, leaving your company strong and healthy.
Watch Foreign Exchange Rates
Fluctuating foreign exchange rates can also have a big impact on your business, too. After all, if you’re importing goods, it’s likely that you’re paying more for them if the value of the pound falls against the host currency.
As a business owner, it’s vital that you understand this and watch foreign exchange rates closely. Fluctuating exchange rates can hamper your cash flow, and could cause you to pay far more for goods and services than you’d imagined. Review them constantly to ensure you’re getting the best deal.
Uncertainty Over Exports
Finally, we’re also experiencing uncertainty over exports, so be careful to not invest too much of your business’s money into production. Over producing items that you cannot sell can be a huge drain on your cashflow, so consider your production numbers carefully.
Use forecasting tools and projections to ensure that you’re not lumbered with unnecessary stock.
To conclude, as a small business owner, it is vital that you’re careful with your money. So, with Brexit in mind, as well as uncertainties over exports and fluctuating foreign exchange rates, be sure to ensure your working capital levels are manageable.