When working in business, financial problems are an inescapable part of life. You’re working on a tight schedule with large sums of money that disappear overnight in expenses. This holds especially true for startup companies. Taking care of finances should be a priority.
1. Having enough working capital is necessary
Living paycheque to paycheque isn’t just reserved for salaried employees anymore. It can apply to an up-and-coming company too. Businesses can get caught up in this habit and it can be hard to get out of it. Waiting for the next big client to finance you is going to take a toll on your budget and planning. Overdraft arrangements with banks can only get you so far.
As a business, you really should have about six months’ worth of expenses in capital before continuing work. This gives your company enough breathing room to create new clientele and expand where necessary. The best way to do this is to find ways to cut costs and then put that spare money aside until you reach six months’ worth.
2. Keep cash-flow consistent
As a business, keeping the cash coming in constantly is always the number one priority. This isn’t guaranteed for certain kinds of business models. Project-based businesses rely on a constant stream of projects from different clients and can be quite unpredictable. Consistency isn’t common and this can lead to problems if you hit a dry spell.
If the business model isn’t project-based, then it’s a different story. In this case, you should focus on regular customers who pay on time and keep business going. Long-term deals are golden here. Customers that are flaky when it comes to payday should be avoided or replaced. Consistency is key in this kind of business.
3. Bookkeeping as a priority
Bookkeeping has to be well organized for your business to function. Small businesses don’t usually follow this line of thought and they are often bad record keepers. It is considered one of the most boring things to do in business. If your company isn’t very enthusiastic when it comes to bookkeeping, consider hiring an organized bookkeeper to fill that void.
Not every startup company can afford to get a specialist, though. You should get someone on your team to take on the responsibility. Unfortunately, not everyone is equally apt at doing bookkeeping. Your administrative assistant might be a good candidate for the job.
4. Keep track of debt
Debt is an inevitable part of starting a business. Getting that initial capital is hardly ever free, and growth can cost quite a lot as well. Even a company just trying to continue their business can take a temporary financial hit. In times of financial turmoil, debt can compound and you might have to take control of it and try to mitigate the damage.
A good way to ease tension is getting a debt consolidation loan. Consolidation loans take your existing debts and combine them into a more manageable one. You take out a card that has more favourable interest and a longer pay-off period. It can help you manage debt long term without too much stress.
5. Projecting revenues is crucial
Predictability and business aren’t two closely related terms. While it would be ideal, you can’t exactly predict when revenue is going to soar and when it will dip below expenses. Still, keeping it as stable and predictable as possible is the main goal. If your business is young and dynamic, it’s not going to be easy. Consult your team and financial advisers so you can most accurately estimate what kind of profits to expect.
When you can predict your revenue, you can also increase expenses where necessary. This along with calculating your operating costs will let you balance the company finances well. Impulsive and uninformed choices are the bane of any company. But if you are a couple steps ahead of your spending, achieving growth will be a breeze.
The business market is an ever-changing dynamic environment that can bring unexpected costs to even the most prepared. Unexpected holes can pop up when planning a budget and it never hurts to be ready for them. Entrepreneurs should always be on the lookout for opportunities to keep their business afloat.