by Sarah Cage
Let's look at this directly. The fact that 9 out of 10 startups fail, and they do so frequently because they run out of money, doesn't make business an easy sphere to dive into. 10% of startups don't make it into their second year, but even established businesses can sometimes find it hard to stay afloat.
To ensure that this doesn't happen to you, here are seven practical ways to keep your business financially stable.
The number one way to keep a business financially stable is to enlist expert help. You might know your product or service inside out, you may have in-depth customer personas and a thorough market analysis on your side, and you may be brilliant at leading a team, but unless you're a financial expert, you're going to need professional help.
A professional financial advisor can help you implement business strategies to improve the financial management of your company. You can lean on them to take on the duties of preparing budgets and performing risk analysis. Their experience and specialized advice on your projects can be invaluable.
However, if you decide to take advice from people online, be careful. Unfortunately, some unscrupulous fraudsters pose as business advisors but lack the experience and qualifications to help you. Check those people on Nuwber not to become the next victim of internet scammers.
Keeping your financial records in order is critical because your financial records form the basis of many business decisions. Without accurate records, you won't know how your business is doing.
Hiring a qualified, experienced bookkeeper is wise if you don't want to do this yourself. They can take care of providing accurate, up-to-date financial information you can use to build strategies.
Employing an accountant is a must if you don't want your company to crash. A professional accountant might handle your bookkeeping, but, more importantly, they will stay on top of all the financial documents required to keep your business financially stable, including profit and loss statements and balance sheets. They can take care of tax reporting so you don't get a nasty surprise at the end of the tax year.
Your business's cash flow is how much money flows in and out of your business. Knowing how much your company generates and spends will allow you to make financial decisions that improve your firm's financial stability. This information is essential to having a financially stable business.
If you don't like what you see when you examine your cash flow, note that most businesses can handle negative cash flow temporarily. And startups might experience negative cash flow because they are spending more on their growth strategies, but this is not sustainable and needs to turn positive for healthy finances.
Cash flow analysis tells you not only how much money is flowing into your business but where it's coming from, i.e. investments, operations, or other financing. Try these cash flow statement templates or talk with your business advisor or accountant about how cash flow analysis can help keep your company's finances healthy.
Debt is often part of running a business, especially in the early days when you may be focusing on establishing yourself in the market and growing your enterprise.
Too much debt, however, can cripple a business. It's imperative not to let it get out of control. Your cash flow analysis should give you the red flag if your business is tied up with debt.
An excellent way to manage debt is to consolidate it. This means opening up a new loan account with more favorable terms than your existing loans. You use the new loan to pay your other debts. Then you only have one loan to pay back with better rates.
Shop around for the lowest fees. You may be surprised by what you can find. A new loan with excellent terms can make repayments more manageable and help keep your business in good financial shape.
Sometimes businesses enter into financial difficulty because they can't get the money they are owed. Many companies that failed could have had a shot if they'd been able to recover the money owed to them by business partners and clients.
Chasing unpaid invoices is time-consuming and sometimes soul-destroying work, which leads business people to debt collection agencies. For severe arrears, getting paid what you are owed might mean using a debt collection agency to recover debts on your behalf.
While a debt collection agency doesn't have special legal powers, they have the resources and focus to pursue your debtors. Typically, you sell the debt to a collection agency to receive a lump sum or the collection agency gets a percentage of the money they collect on your behalf.
To reduce the buildup of future debts, make it very clear how long people have to pay your business and the penalties for overdue payments.
Spending less money is an excellent way to help your company stay afloat. Reducing expenses can significantly improve your business's financial stability.
Consider all your business outgoings and see where you can save by cutting them entirely or switching suppliers. Typical places where businesses save money include insurance companies and energy companies. Changing your suppliers can seriously improve your business's financial outlook if you are not satisfied with their job.
Digital marketing can provide excellent return on investment (ROI) compared to more traditional forms of advertising and marketing. It's possible to run an effective marketing campaign from a cell phone with as little investment as $5 and 30 minutes of your time.
By using social media advertising via Facebook Ads, for example, businesses can market to a specific cross-section of Facebook's two billion monthly users. Ads are easily edited, measured, and managed so you can stay in control and gauge the ROI of your efforts in real-time.
Take a look at some inspiring stats that demonstrate the value of modern marketing techniques:
Email marketing, social media marketing, and other modern techniques are cost-effective solutions that can deliver excellent returns, making them essential for businesses concerned about financial stability.
With a combination of saving money and spending it wisely, you can make your business more financially stable or even more profitable. Being able to manage finances is key to operating a successful enterprise. Whether yours is a startup or an established firm going through some uncertainty, put these tips into practice today to keep your business stable in the future.
About Sarah Cage
Sarah Cage is an accomplished education writer known for her insightful and engaging work in the field. With a passion for empowering students and teachers alike, she has made a significant impact through her thought-provoking articles and research papers.