A 2015 survey of small business owners shows that 76 percent would say that their business is in excellent financial health. Even though three-quarters of businesses could say this, can you? Being an entrepreneur requires a sense of self-confidence and a firm belief in your idea so you can have the courage to invest in a dream of your own, as opposed to living someone else’s dream in a regular job.
There are a number of challenging steps that come your way when you decide to have a startup; these issues range from the general structure of your business to staffing decisions. The financial aspect of starting your business, however, tops the list of factors that need to be considered very carefully and need proper planning and monitoring. There are steps to guide you in the better management of your finances so you can see your dream to its end, without its succumbing to financial issues. Have a look:
Take the financial pulse of your business.
Just as a doctor can tell a lot about a patient’s current well-being just by taking the simple measurements of pulse, temperature, and blood pressure, it is critically important for every business startup to keep strict checks on the flow of its revenue. How much is coming in and from where, and how much is going out and for what purpose? It may sound like a very basic piece of advice, but it is crucial for monitoring your finances. In the beginning of any startup, entrepreneurs cannot risk being stuck in an uncertain financial situation, so it is better that you keep vigilant about the flow of the money that your business is generating. You can use do-it-yourself financial software to keep track of your company’s finances, but hiring a business accountant may be the best step to take.
Related: How to Hire an Accountant for Your Business
Trim down your expenses.
This tip takes a page right from common medical advice, and from household budgeting. Eating less and trimming down is likely advantageous for most people, and spending less than you earn has saved many a household and business from going belly up. While boosting your sales is one way to make more money, an equally tried-and-true method is to reduce your spending. The 2016 State of Small Business Report shows that small business owners planned on upgrading old equipment to be 38 percent of their overall expenses.
Look around to ensure that you are working with the suppliers who are offering the best deals. If you’re not, make the change even if it makes you a little uncomfortable. Also, don’t be afraid to negotiate with your long-time product merchants. You never know, they might lower their prices if they have reason to believe you will bail on them in favor of their competition.
Run a tight ship when it comes to invoices.
A person who has poor eating, exercising, and hygiene habits isn’t in a strong, healthy state. Taking care of your body is important. You can apply this principle to your business’s financial health, too. “Sloppy invoicing habits can lead to lost profits and tense relationships between you and your customers,” says Frank Kasimov of BusinessLenderMatch.com. To avoid this pitfall, engage in good invoicing practices. Be totally clear and transparent about pricing, covering every aspect thoroughly and asking questions to ensure that you are being understood.
Credit check your new customers, and ask for a deposit when a customer makes the order. When billing time rolls around, send the invoice on time, and ask for acknowledgement that it has been received. Hire a specific person to monitor and chase down unpaid bills, and consider charging late fees to motivate your clients to pay on time. Take pains to make your invoices clear and detailed so everyone involved can understand them.
Review your insurance.
Having the right health insurance is important to being in the best health because accidents happen. When starting a business, you need insurance in order for your business to stay healthy for the same reason -- accidents happen. Make sure that your business has the right amount of professional liability insurance, property insurance, workers’ compensation insurance, product liability insurance, vehicle insurance, and home-based business insurance if you’re running your business from home.
Envision your future.
There is evidence that suggests that picturing being healthy can actually help people become healthy. You can do the same for your business’s financial health by envisioning where you’d like your business to be in one year, five years, ten years and even longer. Having a goal in mind can get you to where you’d like your business to be financially.
Related: The Extraordinary Power of Visualizing Success
Look at opportunities for growth.
Remember the first tip? Having checks on your revenue and expenses? Keeping financial records? Those come in handy when you’re looking at opportunities for growth. Each year, analyze those financial statements with your financial goals and projections in mind. The analysis provides valuable insight on how your goals should adjust for the following year.
Seek alternative financing.
Sometimes, even those with the healthiest eating, exercising, sleeping, and hygiene habits need a little bit of help in the form of vitamins and supplements. If you have unfortunately landed into a financial crunch or simply lack the means to continue your startup venture, you can apply for a loan from your bank and seek alternative financing. There are a wide range of loans that you can apply for, keeping in view the nature and financial status of your business. Get in touch with your bank to understand your options better as they will be able to help you identify the options that can serve the purpose you have in mind.
Related: Why Alternative Financing Options Might Be Best for Your Small Business
Armed with the right tools, a plan for how to use them, and the knowledge it takes to keep your business running smoothly and in perfect financial health, you can now be on your way to a more successful and meaningful business.