Though the state of the current economy has made it relatively easy for bright new entrepreneurs to start and grow a business, unforeseen problems and fluctuations in the market can turn a business plan on its head, and land a company in some seriously tough times. If you’ve had a brush with these, or you’re seeing storm clouds on the horizon, here are some handy financial tips for seeing your business through hard times…
Reassess Your Budget
Managing costs are absolutely essential for any profitable business, especially it’s a small business relying on credit. When times are tough, a well-thought-out and carefully implemented budget could be one of your most important tools for success. At the very least, you should be working according to an accurate system for profit and loss projections. If you’re lacking these in your budget, start working on them immediately, with a view to both short and long term forecasting.
Practice Anticipation More Often
Change, even if it seems like a wholly negative change for your business, can also represent an opportunity if you know how to handle it. Sweeping, drastic changes in your company, your industry, or the economy at large have to be anticipated and properly prepared for. One of the most basic ways you can do this is starting an emergency fund to see your business through abrupt, unexpected challenges. If you suddenly need to hire a commercial roofing company or pay to keep up with a change in government policy, having a cash cushion you can fall back on can make a huge, positive difference.
Keep an Eye on your Cash Flow
Issues with cash flow can destroy a business that may otherwise have been able to survive a patch of turbulence. A massive proportion of business failures are caused by poor cash flow management, and monitoring this properly is one of the most important tasks of any business owner. Your expenses and revenue are never, or almost never, going to be a dependable constant, and capital requirements need to be forecasted for any kind of shortfalls, seasonal ups, and downs, or one-time large investments.
Review your Monthly Statements
Every business should prepare and review three basic statements every month. These are the balance sheet, the profit and loss statements, and the cash flow statement. Keep accurate accounts of all the money that are entering and leaving your business, and inform yourself on any big purchasing decisions by consulting your budget and statements. This will not only keep you clued-up on the current state of your business but can be essential when applying for loans.
Improve your Billing and Collections
Start applying some decent accounting software to your financial management, and you’ll get a much better handle on all your receivables and payables. There are a lot of inexpensive and effective tools for this on the market, but if your business is rapidly expanding, you may want to pay out a little more for any extra features you feel you might need.