6 Corporate Finance Moves You Should Do!

Introduction

Corporate finance isn’t only for large corporations. It’s a toolkit that small and medium-sized enterprises (SMEs) can use to grow, improve performance, and make better financial decisions. This guide introduces straightforward corporate finance tips to help business owners in the MENA region (UAE, Saudi, Egypt), to enhance their ROI and streamline operations. Let’s dive into the six powerful financial strategies!

1. Leverage Financial Data for Better Decision-Making

Financial data is your compass. Reviewing key metrics monthly allows you to see where the business stands and make data-driven decisions instead of relying on intuition. Get this done as soon as possible, this function is required, and has to be designed, managed, and implemented by an expert. If not done, it will remain an empty seat!

• Tip: Set up a monthly financial dashboard to track profit margins, cash flow, and return on assets (ROA).

2. Optimize Working Capital to Boost Cash Flow

Working capital—the balance of current assets and liabilities—can free up cash for reinvestment. Efficiently managing it ensures smooth operations without cash crunches. This required rigorous and continuous follow up, it's not a one time task, so delegate it to the right knowledgable person in your team if possible.

• Trick: Negotiate with suppliers for extended payment terms and explore ways to speed up customer payments.

3. Understand and Improve Your Break-Even Point

Knowing your break-even point tells you when your revenues start covering expenses. This insight helps you assess profitability and manage costs effectively. This is crucial to be continuously updated, with every major change in products, services, or at least with every budgeting cycle. This will shed light on the impact on net results for such decisions, or changes.

• Tip: Calculate your break-even point yearly or with major changes, like adding a product line. It’s a reliable indicator of business health.

4. Streamline Accounts Receivable and Payable Processes

A slow collection process affects cash flow, and efficient payments build trust with suppliers. Streamlining both processes improves liquidity. Should your service, or product well received by your clients, you will then be able in most cases to enforce payment terms, or at least enhance your position. Along the past years, I have seen business leaders who are actively following this up, rarely when they face doubtful debts.

• Tip: Automate invoice reminders or offer small early-payment discounts to customers to encourage quicker payments - you could factor that already in your pricing.

5. Choose Financing Options Wisely

Financing can help you grow, but it must be chosen carefully. Options with high-interest rates or strict terms can backfire in the long run. Calculate it carefully, especially for long term commitments, you don't want to do all the effort, for someone else to reap its benefits.

• Trick: Compare different financing types and their terms. Look at government-backed programs in the UAE and Saudi Arabia, which may offer low-cost options for SMEs.

6. Focus on ROI: Not All Expenses Are Equal

ROI measures the profitability of investments, guiding you to prioritize spending that yields the highest returns.

• Example: Employee training often has high ROI due to productivity gains. In contrast, non-essential expenses may have limited returns. Although calculating ROI on training might be a bit complicated to isolate many factors, however on a scale of 3-6 months you can experience the benefits, and the morale of the team will improve performance. So select your expenses as well.

Start implementing those tactics, and tell us how you your business is performing, or should you have questions please send them here too.