Five Finance Management Tips for SMBs

These are challenging times for Canadian SMBs, many of whom lack the clout of larger enterprises with which to weather the ongoing financial storm. But with careful financial management, it’s often possible to sail through to brighter skies and calmer waters. Here are our five top tips for effective financial management for SMBs:

1 - Complete a cashflow forecast and identify problems early

For SMBs, particularly recent start-ups and those going through periods of expansion, cashflow problems are common. An accurate cashflow forecast is one of the most fundamental ways of avoiding problems further down the line. In essence, a cashflow forecast is an estimate of what the business’ cashflow will be over a given period, whether that’s quarterly, every six months or over a full financial year. By adding together what you expect to take in sales and then deducting the sum of your estimated operating expenses, you can arrive at a monthly cash figure, and predict future problems before they arise.

2 - Separate personal/business finances and use an accountant

Another error that small businesses often make in the early days is to not separate personal finances from business finances. This should be done as a matter of course, and if you haven’t done so already then you should open a dedicated business account that you only use for your business. This may cost you a little, but it’s worth it to avoid accounting headaches later on. It’s also highly recommended that you get a professional accountant as soon as possible who can keep an eye on things and manage your dealings with the Revenue Agency/ Revenu Quebec.

3 - Purchase capital items through loans or lease rather than cashflow

Capital items are those that will produce revenue through the work they will do, such as computers, pieces of machinery, tools and premises. They are an essential part of any business as they make production possible, but they can bite heavily into your cashflow, leading to potential problems later on. Purchasing these capital goods through loans and alternative means makes sound business sense, as they will in effect pay for themselves over time and the repayments mean that smaller, more manageable amounts are flowing out of the business each month, enabling you to budget more successfully.

4 - Invoice promptly

A common pitfall for many SMBs is that having done the work or supplied the goods, they then neglect the important process of invoicing the customer. In some cases, it can be months before the invoice is eventually paid, bottlenecking your cashflow considerably. As well as delaying your own payment, invoicing late can look unprofessional, and some clients may resent the unpredictable effects it can have on their own finances. Wherever possible, invoice as soon as the work has been carried out or the goods delivered.

5 - Manage what you owe to CRA/Revenu Quebec with professional tax software

There are many good reasons to use professional accounting and tax software to manage elements of your finances, not least avoiding trouble and unwanted surprises from the CRA or Revenu Quebec. They can streamline the process considerably, as well as helping you to avoid the dreaded prospect of an audit. And because such software packages are created by tax professionals they can help you to ensure that you meet CRA/Revenu Quebec requirements, so you only pay what you owe, rather than too little or too much.


David Spring blogs about personal finance and taxes, covering everything from tips on Impôt Rapide’s tax software, to better financial management.  When he’s not blogging online, David enjoys watching movies and dining out with friends.