Financial difficulties are the most common cause of new business failure. Even the most established and high-profile companies face financial challenges. In this guide, we’ll outline some practical steps you can take to reduce risks and navigate obstacles.
Implement a Clear Money Management Strategy
Managing money isn’t always easy when running a business. Whether you’ve recently launched a venture or you have years of experience, balancing the books can be tough. Implementing clear strategies and policies is crucial for efficient accounting. From day one, you should have processes in place governing how you budget, allocate funds, invest money, input financial data and monitor revenues, sales, profits, and expenses.
Budgeting is one of the cornerstones of effective money management. Today, you can access amazing resources, including apps, software programs and online tools, to help you budget. It’s essential to ensure your budget covers all costs and includes accurate, up-to-date information and figures. Using a comprehensive budget can help you reduce the risk of cash flow problems, cut non-essential spending and highlight the best ways to invest capital.
Seek Expert Advice
If you don’t have financial expertise or experience in accounting, you’ve got too much on your plate to take care of business finances, or you’re navigating a transitional period, seek advice. From clearing debt and growing your business through investment to coping with the unexpected departure of your CFO, working with others can be hugely beneficial. Consider the impact of temporary CFO services if you’re operating without a CFO or the benefits of getting advice about investing to fund expansion plans. There are many ways to get help for your business, from outsourcing and hiring new team members to working with consultants or freelancers and contacting agencies and financial service providers.
Get Your Timing Right When Growing Your Business
Many entrepreneurs have grand plans to grow their business. Expanding is exciting, but it can also be risky. Timing is critical when making decisions, particularly when it comes to financing growth. Ideally, your business will be turning over profits, with the demand for products and services rising before you invest more capital or borrow money. If the demand has fallen, industry trends indicate slowed growth, or you have outstanding debts, it may be better to wait.
Keep an Eye on Your Outgoing Money
Maximizing profits is an effective way to reduce financial risks. It’s understandable to focus on driving sales and bringing more money in when talking about profit, but it’s also crucial to keep an eye on outgoings. If your expenses are sky-high, you’ll struggle to generate profits, even if sales are strong. Look for ways to streamline spending and cut back on non-essentials. Examples include negotiating better deals with suppliers, shopping around for the best offers on utilities and services, reviewing your staffing structure and considering alternative working arrangements. Since 2020, for example, many companies have embraced remote or hybrid working models. If you don’t need a permanent base, you could save a fortune on rental fees.
Every business owner has to contend with financial challenges and risks. If you run a company, it’s beneficial to be proactive in reducing risks. Key steps to take include implementing a clear money management strategy from day one, seeking expert advice and keeping a close eye on your outgoings. It’s also crucial to get the timing right if you’re planning to grow the business.
