In a perfect world, business owners would have the great fortune of being able to focus 100% of their attention on doing what they love and everything else would just take care of itself. But it’s not a perfect world. And of all the challenges a business owner faces, financial challenges have perhaps the greatest influence on the potential undoing of a business. Here are a few tips to help you navigate those financial challenges.
- Cash Flow: If you were to poll 100 business owners, chances are that cash flow would be one of the top financial challenges they face. The undeniable fact is that if cash going out outpaces cash coming in, you’ve got a problem. Here are four financial actions you can immediately take to help gain control over your cash flow:
- Budget: If you don’t have a budget, make one now. Flying by the seat of your pants will not cut it. And once you have a budget, stick to it. If you are not a financial expert, enlist the assistance of a company that specializes in business financials or your accountant. Consider the cost of these services to be an investment in the financial health of your business and not an expense.
- Receivables and Payables: Having lots of receivables on the books may be great for your ego but it does nothing to help cash flow. If the collection of receivables continues to lag behind payables, consider shortening your terms and make it as easy as possible for your clients to submit payments. If you are not set up for credit card payments and online bill paying, consider adding these options. Likewise, take advantage of the full term provided by your creditors and suppliers. If they offer online payment, wait until the end of the term to submit payment. It may also be possible to negotiate longer terms.
- Manage Debt: This is crucial. We’ve already discussed having a budget and sticking to it. You must carefully consider every expenditure to make sure it is necessary.
- Rainy Day Fund: No matter how carefully we follow our budget and monitor our expenses, unexpected expenses do pop up. Be aware of those things that could potentially happen and budget accordingly. It may be advisable to set up a separate account for potential unexpected expenses and funnel a percentage of your income into that account. Then, when those unexpected expenses pop up, you’ll have a source of funds to manage those expenses.
- Financial Records: It’s crucial that your financial records are in order, up to date and easily accessible. They are your number one source for the information you need to make sure you are on budget and are growing. If you are not an expert in managing financial records, consider using a business financials expert or your accountant to manage your financial records.
We hope you have found the above tips to be helpful. At Business Financials, our mission is to help clients maintain financial viability in the present, while taking a proactive approach to achieve future goals. Contact us today if you need an expert to help ensure your financial viability.
Small Business Financial Challenges and How to Overcome Them