The news about recent economic problems and an impending double-dip recession has been hard. Ongoing eurozone economic concerns have triggered a complete collapse in consumer confidence not seen since the original recession of 2008. Growing concerns about global credit as well as declining consumer confidence have led to restrictions on loans made available to small businesses as worried banks reduce their perceived exposure to bad loan repayments. With consumers finding it difficult to get hold of their money and credit, it’s no wonder small businesses are struggling. This article talks about the important role and benefits of allowing small businesses to navigate through these difficult economic times.

How can accounting software help small businesses?

The business must be lean and financially sustainable to survive in the current business environment. Small businesses with large overheads and complex financing structures must work on rearranging business to gain control of their long-term economic futures. Now is not the time for reckless investments in pursuit of growth that only add to the increased debt and inflexibility that can eventually lead to the collapse of businesses. Now is the time for sensible and stringent financial management that allows a business to become financially independent. Accounting software can be central to helping small businesses become financially independent and examine how below.

Full Focus on Cash Flow

A business owner must focus 100% on the financial health of his business. This means having a thorough understanding of the cash flow position of businesses. Nothing is more important in a small business than the cash flow position and consequently must be managed very tightly. One of the difficulties for small businesses on top of cash flow is the organization of receipts and invoices. An accounting software package conveniently compiles all relevant financial information and presents easy-to-understand dashboards and reports of company performance. Once the necessary knowledge about the performance of the company is provided appropriate action can be taken to improve the performance of the company.

Focus on Customer Satisfaction

In times of economic hardship, competition increases significantly in all respects. Since customers are more concerned with their buying decisions, small businesses need to make sure that every aspect of their offering is appealing to the customer. Margins are widely squeezed across industries in the hope of wooing hard-up customers and so the only real difference in attracting business is customer service. An accounting software package not only improves the productivity of the business but also helps all the customers and suppliers in one easy-to-manage database. This structured knowledge allows employees to provide more tailored service to customers.

Look for Ways to Reduce Costs

In this economic environment, any investment that does not directly add value to the top line should be cut. Accounts payable features detail every penny a business spends with an accounting software package. This allows a thorough review of expenditure to ensure that savings can be made where appropriate. For example, costs can be deducted on changes to paper, postage, direct debit payroll. These cost reductions will allow the business to reduce its operating costs without deducting income-generating expenses in the business.

Consolidate Suppliers

Businesses can also use the accounts payable features within their accounting software packages to streamline their supply chain. Many businesses have unnecessarily identical supplies from a range of suppliers. Buying in bulk is always a more economical way of doing business. Condensing suppliers with large orders are more commercially viable in reducing supply costs. The preparation of reports by an independent supplier will provide valuable information about the profitability of each supplier contract.

Negotiate Better Rates with Long-Standing Suppliers

In addition to supply chain consolidation, there may also be an opportunity to renegotiate rates with long-standing suppliers. The longer the relationship between a business and a supplier, the more apt it is for the business to qualify for a rate that reflects the loyalty of the relationship. Reducing supply chain costs can make a significant and welcome difference to a small business P&L in times of tough recession.

Constantly Look for Ways to Reduce Non-Value-Added Admin Work

Employees’ time is the company’s greatest asset in any small business and therefore time on the non-value-added activity should be minimized wherever possible. An accounting software package ensures that people are not tied down by managing basic bookkeeping and completing quarterly and final year financial reports. Managing the financial affairs of a business can be very overwhelming if not managed properly. Having efficient software to automate these admin tasks allows employees to focus their attention on growing the business and generating income.

Streamline Payroll and Human Resource Management

As already discussed, people are a huge asset in any small business. An accounting software system can help provide detailed information about employee costs in addition to work hours and absenteeism information. Having detailed information about employee costs allows a business to more accurately plan for the future and budget correctly for human resources. Also, from a financial standpoint, large fines are imposed on businesses that make mistakes in tax and national insurance contributions. Having automated software negates the risk of mistakes being made at a time when the risk of incurring fines cannot be taken.

Simplify Billing and Invoicing

Not being on top of your realizations in today’s challenging business environment can really be the difference between success and failure. An accounting software package allows a business to completely manage and organize its invoicing and payment deadlines around the business’s bills and costs. This way the invoice payment is received prior to the bill payment ensuring that cash flow is never a problem. Effective and streamlined billing and invoicing ensure that business income remains consistent.

Assertive Debt Collection Techniques

Even if a business has streamlined invoicing and billing processes, there will still be some customers who do not pay on time. All the structure and processes in ensuring invoices align with business costs will be wasted unless good debt collection procedures are also adopted. Businesses must know when to make phone calls send written communications and when to work with debt collection agencies to optimize income collection.

Know Your Financing Options

Accounting software packages allow a business owner to make detailed forecasts of projected income and expenses over the short, medium, and long term. Having a long-term view of capital expenditures allows for more intelligent decisions to be made around financing the company. Last-minute loans as a rule are expensive because the owners run out of time and they only need to pay the bills. All types of business financing, from credit cards to structured loan agreements, should be reviewed in line with long-term accounting forecasts to ensure that the best-suited finance is available at the best possible price.

Investing in accounting software packages has never been more relevant for small businesses. The benefits go far deeper than allowing businesses to keep accurate and timely financial records. Accounting software enables a business to self-analyze each business process in terms of profitability and business returns. Businesses that adopt the mindset of accounting software, by definition, accept the notion that all company expenses should be controlled and used to generate additional revenue for the business. These lean businesses will be financially sustainable and able to withstand these tough economic times so that they are well-positioned in the market to capitalize on when consumer confidence returns.