5 financial management tips for freelancers and SMEs

Having an effective financial management in the SME depends on good planning, an adequate cost structure and a good management of liquidity and treasury. Many companies encounter the problem of not investing every day because they have no financing. And if they don’t have financing, it’s because they lack control of it.

However, it is possible that if you are self-employed or if you have a small business, you begin to successfully and effectively manage this area of ​​your business. In this post we will see some financial management tips that you can start applying in your company and for which it will be extremely useful to have an ERP in the cloud like my management.


  1. Create due dates for your invoices

One of the problems of financial management, is liquidity. If customers do not pay in the corresponding time, the company or the self-employed person may encounter cash problems when paying their suppliers. So that this does not happen, we must try to clarify the payment terms with our customers and enforce them.

One of the options offered by your ERP, is that you can set the due dates of your invoices based on the payment method. You can see it in our user guide billing in the cloud. For example, perhaps if the modality chosen by the client to pay for the order is by check, you want to establish a shorter payment term, since charging the operation will take you more time than by bank transfer.


  1. Control installment payments

Suppose you are going to charge your client a considerable amount of money. It is perhaps too much to do in a single payment. Then you decide to choose the installment payment, where you must decide the time available to pay and the fees you will have to pay each time.

The installment payments are a way to better manage your liquidity , since instead of having to wait 2-3 months until the client makes the payment, you can get maybe 50% at the beginning, 25% the following month and another 25% the next. This gives you much more liquidity margin to face the payments you have to make.


  1. Adjust your cost structure

In your online ERP you can also see the relationship between income and costs. There will be some costs that are eventual and others fixed. In order for your business to have some flexibility, you need to adjust your fixed costs so that they don’t inconvenience the growth of your business.

This has, for example, a great relationship with the seasonal factors that influence your sales and your income. Perhaps during the summer you sell less and the fixed costs have a greater weight on your finances, which is noticeably in a lower profit or, even, that you incur losses. Ideally, your cost structure is tight enough so that you can retain control.


  1. Limit external financing

Increasing your column of liabilities to have a greater liquidity can have a drawback: the increase in fixed costs in payment of loan installments and interest. Although having short-term financing is a great help for companies to deal with their payments, the truth is that having a large dependence on external financing harms your business.

The key is to limit external financing to the needs of the project. Indebtedness in itself is not bad; what is bad is not knowing how to use this financing to invest in assets that in turn generate a return on investment that results in an increase in profits.

Analyze in detail how much you are going to invest, how much you will depend on external financing and how much of the company’s funds, to what extent you will report benefits and how long it will take to generate them. Having a detailed financing plan is essential for financial management.


  1. Reduce your financial dependence

Many SMEs and freelancers have the problem that they depend excessively on a small group of recurring clients. Or, even, they may only have a fixed client. A delay in the payment of this type of customers can cause liquidity problems in the company, so it is necessary to reduce their dependence.

In this case, there are several strategies you can follow to win financial independence. For example, you can try to get more fixed or recurring customers to reduce their percentage over the total amount, which would make a delay in payment not affect the waterline of your business.

Another option is to diversify, opening to other business lines and alternative sources of income. Also create a portfolio of prospective clients wide enough to reduce your dependence on fixed customers.

Check out America's Best Bookkeepers
About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing services to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks file, critical financial documents and back office tools in an efficient and secure environment. Complete Controller’s team of US based accounting professionals are certified QuickBooks™️ ProAdvisor’s providing bookkeeping, record storage, performance reporting and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay services. With flat rate service plans, Complete Controller is the most cost effective expert accounting solution for business, family office, trusts, and households of any size or complexity.