Businesses revolve around their finances, and many good businesses go to the wall simply because their owners are better at the other aspects of running a business than they are at managing cashflow. If the finances get neglected, at some point your cashflow is going to dry up, or you’ll have a dry spell with no contingency, or you won’t be able to pay for unexpected increases in costs.
The ways in which finances can affect your business are many; but here are five ways that you can prevent finances from affecting your business.
1. Get the right accountant.
If you’re not a whizz at business math, this is probably the single most valuable action you can take to protect yourself from financial difficulties. Don’t just go for a bookkeeper or accountant who completes all the spreadsheets and gets your tax return in on time – sure, your books will balance, but that won’t stop the money from running out at the wrong time. Get someone who understands business and can help you manage your finances to get the best out of them, and prevent financial concerns getting in the way of your business.
2. Make sure your systems are all operating effectively.
If most of your revenue comes from online sales, for example, then are you checking to make sure the site is operating at peak efficiency and giving customers the seamless buying experience they expect? It only takes one hiccup for a potential customer to give up and go elsewhere, so use a specialist service to make regular checks of your site’s functionality and usability.
3. Use your budget wisely.
Your business budget is only useful if you’re using figures that are as accurate as possible. Some projected figures will be estimates, but they should still be based on fact, not just your hopes and aspirations. If you have a well-prepared budget that has allowances built into it for price increases, higher material costs, and lower turnover, it will be a much more useful tool.
4. Create a contingency fund.
A contingency fund is vital if you want to avoid financial difficulties. While it’s tempting to put all your profits back into the business or into your salary, unless you put some away every month for a rainy day, you’ll have nothing to fall back on should the worst happen. The money you put into your contingency will be a lifeline if you encounter a serious problem or cashflow issue, and if you don’t use it, the money can be earning you a little interest on the side.
5. Don’t be an ostrich.
Burying your head in the sand is never an answer, and hoping that money problems will go away if you concentrate on making more of it rarely turns out well. Nip any cashflow issues in the bud, and adapt your budgeting to reflect what you’ve learned from the experience.
If you don’t pay attention to the way your finances are operating, you’re asking for problems down the road, so follow these five tips and don’t let financial problems get in the way of your business’s success.