WHATEVER the economic situation, the smart business owner can take steps to mitigate the downside. Now might be a good time to consider outsourcing your finance function: to focus on credit control, to reduce cost, to improve management information and to free up time to work on beating the competition.
1. Credit control.
Things are still tough and SME business is suffering from increased late payments. With the prospect of an extended period of difficulty ahead, what should entrepreneurs consider to ensure survival, as a minimum, or growth, at best? Overdue payments normally mean that companies are operating closer to their spending limits, be they overdrafts or banking/funding covenants. Therefore, focusing on proactive debtor management is extremely important.
2. Reduce the cost of back-office functions.
In a tougher economic climate, it is even more important to manage your costs closely and, where possible, reduce them. Similarly, it is important to make regular costs predictable, with no nasty surprises at the end of the month. You will achieve both of these by outsourcing back-office functions, with reduced costs on staff and infrastructure and agreed pricing up front. Areas to consider are finance, payroll, HR, IT and marketing.
3. Improve management information
High- quality management accounts presented promptly mean you can take better, faster decisions. It means that you understand your financial situation and can maintain enough headroom underneath covenant or overdraft limits to keep your funders happy and make business-critical investment decisions at the right time.
4. Free up time
Outsourcing your back office will give you the opportunity to dedicate more time to your customer base. In order to protect your revenue streams, you need to understand how your customers' businesses are affected in a downturn, spot opportunities that these changes throw up and, very importantly, protect them from competitors who will target them to replace their shrinking base.
You may have to offer improved terms, short-term offers and better customer service to ensure loyalty. This all needs time and, if you have to dedicate your valuable management time to your back-office operation, finding the extra time is much more difficult to achieve.
Conclusion
Outsourcing your finance function is not as difficult as it seems. Many companies already outsource their payroll and finance outsourcing can be achieved with a progressive approach, keeping some functions in-house, if that is what is required. What is clear is that you give your business the best possible chance of emerging from the downturn healthy, more efficient and ready to take advantage of improved conditions.