World Executives Digest | 4 Ways to Create Financial Stability in a Small Business | Running your own company is a great way to achieve financial freedom, but that freedom must be won.
Businesses need to make enough money to cover their expenses and still make a profit, and failing to do so can sink a small business. However, there are plenty of methods you can use to maintain your company’s finances. Here’s what you need to know.
Small businesses have the deck stacked against them in many ways, but it is a business model that depends on invoices that has it the hardest. Invoices are sent to clients in the wake of services rendered and are to be paid at a later date, often 2 weeks or more. While this is of negligible concern to established and successful businesses, it can create a cash flow problem for smaller businesses. However, factoring companies can help you get paid sooner, which can possibly be a life saver. You may be asking, “What is a factoring company?” Invoice factoring is the process by which you can sell your invoices to a third party in order to receive your payment immediately. The downside is that this service isn’t free, but it still allows your business to maintain cash flow in more pivotal moments.
Every business needs supplies of some sort, and that comes from a supply chain that you arrange yourself with other businesses such as distributors and manufacturers. Most businesses buy their supplies from distributors, but you can cut out the middleman in order to save money. Manufacturers offer the lowest prices on goods, because distributors and wholesalers add value in order to sell the items in question at a markup. There’s a very good reason that companies prefer the added value of working with distributors, but it can be helpful for smaller businesses to sacrifice that added value in favor of lower costs. As your business becomes more established, you can begin to lean on distributors more, as well, as that is generally a better option when you can afford it.
In addition to lowering the cost of maintaining your inventory, you can eliminate some costs outright, though these are few and far between. One prominent example is committing to a paperless business model. Going paperless is a common tactic among businesses who wish to cut costs as well as curry favor from the ecologically minded. This is a great expense to forego, as digital documents are generally preferred by business owners, employees, and consumers alike, and it’s good for the environment. This tactic can eliminate the repeat costs of paper, ink, and toner, as well as the larger up front cost of a printer and the price of maintaining that printer. Doing so is even more beneficial when you consider that amount of data that can also be stored digitally in order to further reduce the costs associated with physical documentation.
Hiring an Accountant
Managing one’s finances is of the utmost importance, especially in a business setting. Finding ways to reduce overhead and increase revenue are important parts of making a business more successful, but doing so depends on having an accurate understanding of your overhead, your revenue, and your remaining profits. Hiring an accountant is an important part of conducting a business, as accountants can provide a level of accuracy that the average person can’t in order to give you a complete picture of your finances. With this information at your disposal, you can tailor your approach to address your weaknesses or play to your strengths, which is a crucial part of long term success.
Managing a business’s finances is no walk in the park, as there are many factors at play that can affect those finances. However, these tips can help you keep your small business afloat in its early years so that it may grow in time. By taking a strategic approach, you can keep your coffers full and your business booming.