When it comes to business, money talks. You might not necessarily be in it for the money alone, but you’re not going to get very far without it. When it’s smooth sailing, your finances might not be too great of a concern. However, when waters get choppy, it’s often the finances that get hit first. A business that gets hit where the money is gets hit where it hurts. Rather than trying to plug the holes in your ship, you should think about how to prevent those holes in the first place.
The usual suspects
The first thing you have to do, no matter how new or established the business is, is to get a clear understanding of your overheads. In particular, learn the most regular among them. Know your utility costs. Know how much you pay in rent. Know the services to which you subscribe. Then start prioritizing them. Start thinking about which expense you could get away with cutting first if you absolutely had to. Have a plan to scale down your overheads at all times. That way, if things get untenably tight, you can reduce spending in a matter of days without inadvertently cutting something that might be vital to the business. Take the time to look over your current service providers and their competitors. Internet and utilities have more wiggle room in terms of bills. If you’re able to incentivize your providers by letting them know you might be at risk of leaving, they may reduce your costs. Can you be more resourceful in reducing energy or printing costs by implementing new standards in the business?
The cost conundrums
What about the more major costs in the business? We’re not talking about particularly big energy bills, anymore, but things like the computer technology and the machine equipment you use in the business. To many enterprises, these are vital components and many of your processes don’t work without them. You can’t get rid of them, but could you get them for less money than you’ve been spending? The most likely answer is: yes. Shop around before you buy, making sure you’ve seen the same piece of equipment or its equivalent from at least three suppliers to try to find the best price. Don’t overlook used equipment. Refurbished computers, in particular, are a reliable buy as they’ve usually been fully serviced and removed bugs before they’re passed onto you. You don’t always necessarily have to buy, either. This is particularly true of home contractors, construction and similar industries. If you don’t see yourself using a piece of equipment often enough to justify its costs, then lease it to keep your costs low.
The wrong hire
The same logic goes for your employees. No one likes to fire anyone. It creates a bad atmosphere throughout the whole team. So, do your best to avoid this situation as much as possible. Make sure you don’t have superfluous employees in the first place. You might get overzealous when your company becomes more successful and hire another team member as soon as you can. However, if you suffer a little financial bump in the road, can you afford to keep that new employee? Ask yourself that before every hire. Follow the advice of www.businessknowhow.com/startup/outsource.htm and know when to outsource instead. Sometimes it’s more cost-effective to rent someone’s talents rather than giving them a place in house.
The sudden cash flow drought
Perhaps the market has shifted. Perhaps your costs have skyrocketed as of late. Perhaps you just had a bad quarter. There are a hundred and one reasons that your cash flow can suddenly dry up, leaving you with many more overheads and costs than incoming profit. Always have a plan to give your business a boost when that happens. Look for favorable loans, such as financing your equipment with www.equifyllc.com/equifyfinancial/. If you use invoices, then chase down any payments you haven’t yet received. If you have spare equipment you can sell, then do it. But bear in mind that these fixes have to be temporary. If your cash flow problems are going to continue in the long-run, then you may need to think of more drastic measures.
The credit crunch
Borrowing money and using your credit can be a tremendously helpful tool to keep your business finances smooth. It’s recommended that every business keeps a good line of credit. However, don’t get to the point that you start relying on it too much and you don’t pay attention to whether or not you can adequately pay it back. Even if you’re far, far away from your credit limit and you’re handling things fine for the moment, make sure you have a debt management strategy in place and in play. Similarly, if you provide a line of credit to customers, take steps to avoid bad debts such as ensuring in advance that they have a regular income and a good credit score.
The slippery suppliers
Connections to suppliers are an important relationship for any business owner. Whether it’s goods, tools, or raw materials, they provide the fuel to keep you going. This is why problems with your supply chain can start a chain reaction that endangers the entire business. When choosing suppliers, the secret is to choose more than one. Always have a backup. What’s more, get to know any supplier with whom you work. Know who supplies them, know the risks to their own supply and make sure they’re trustworthy enough to let you know in advance when there might be an issue. Don’t get caught out there because you relied on the wrong partner.
The breakdown barrier
When your equipment fails, it costs you in more ways than one. To start with, downtime costs you money. You’re paying all the same overheads while making fewer returns on those investments. Have a disaster recovery plan for all your equipment. Computer devices, for instance, have a BYOD policy so if the office tech fails, people can just as readily bring their own. Invest in training and proactive maintenance to avoid these tech issues. In manufacturing and contracting, teach equipment operators how to do on-the-job maintenance so you have a regular health check. For computer technology, make use of IT services like www.computercourage.com/it-support/, who are waiting and ready to jump in to solve any issues.
The missing goods
If you’re in retail, then you have to be aware of inventory shrinkage. There are many causes. Products will spoil. They’ll get lost in the system. But 70% of all inventory shrinkage is due to theft from shoplifters and from staff members. It is essential to tackle this issue if you don’t want to consistently lose large chunks of your potential profit. Use an inventory tracking system on your most valuable goods. Train employees to spot, handle and report theft. Have an authorized storeroom accessible only by a few and have a record kept of who accesses it and when.
The bigger shinier rival
What if earnings are decreasing because competition outside is starting to change the market? Well, you need to find how and why it’s doing that. If a business is simply better known, better established and better branded than yours, then a marketing consultant can help you get competitive once again. Finding a niche can help you better focus your market so you have a more reliable and specific user base. But you also have to consider when it’s time to innovate and change your business practices, such as setting a new price point or offering a new service. You can’t avoid competition forever just by making your business look better. You have to continually do better, too.
The terror of taxes
If you’re paying the standard rate on tax, there’s a very good chance you’re doing it wrong. If you’re paying more than that rate, you’re definitely doing it wrong. You might have some idea of what deductions you can make, but if you can’t file your taxes like a trained professional, you aren’t going to get the returns that work best for you. For every single business owner, no matter how small or large your operations are, it is worth considering hiring a chartered accountancy team like www.padgettbusinessservices.com/about-us . Even if it’s for tax only and not bookkeeping, a firm grasp of the law is essential to getting more of your money back as well as avoiding the red flags that might trigger an audit from the IRS.
As much as you might not like it, a great deal of business is worrying about money. Put the right securities in place and know your options in advance so you can spend less time counting pennies and spend more time making them doing the work that you love.