There are many motivations as to why we all start-up and sun our own businesses and no matter if it’s a local mom & pop store or the planet’s largest corporation, one thing we all have in common is the desire to make a profit. Even charities and not for profits need to ensure good financial health, as any surplus after running costs can help further their cause.
So the way to do this is to monitor your finances and notice any issues and deal with them promptly.
Regularly Do Your Book-Keeping
The first thing any business should do is not neglect regular book-keeping as this is the main tool to enable you to see how you are performing. If you don’t use a bookkeeper then it’s almost essential to get good software as this automatically generates reports such as profit and loss, cash flow and balance sheet. If you review these regularly then it will give you much more of a heads up if there is a problem.
Have an Annual Business Plan (As a Minimum)
Every business needs to have an annual business plan written up and this involves taking a look at how your business has been performing in the previous period, and if you are just starting then it will be more of an assessment of how you are funding the start-up costs and where you think your sales will come from. This is a document to refer to throughout the year, and not just at the start and end as it’s important to know if you are hitting those plans.
Don’t Let Poor Cashflow Kill You
You can easily have an otherwise healthy business and be killed off by poor cash flow. How can this happen? Well you can have lots of customers owe you, so looking at your balance sheet which includes these due invoices as assets it’s good but if you simply don’t have enough cash in the bank then it means you will be unable to pay your bills.
Make sure you are vigilant in chasing up overdue invoices. Otherwise having a good lending source can be helpful, a firm such as Opportunity Business Loans can help you out with this.
Keep Track of Progress
It’s important to know whether or not you are succeeding. So you need to have ways of tracking this and it’s essential to know what to measure, we have already touched upon this when talking about the business plan. Simply checking how much money is in the bank doesn’t actually tell you much.
You need to be aware of what should be put aside for tax, what payments are due out and what is due to come in,
Know When To Change Strategy
Once you have all of the above info available then it’s much easier to be able to know when you are simply waiting on cash coming in and when you have an actual financial problem. It also allows you to know how long it will be before an issue becomes critical.