After two years, COVID-19 is still affecting businesses financially. Around 71% of small business owners in the U.S. have said that the most recent spike in cases had a negative impact on revenue. Although small business optimism is quite high at an assigned score of 63 — up from a record low of 39.5 in the second quarter of 2020 — business owners still face a major challenge of generating adequate revenue under difficult conditions.
Overall, many businesses currently have a long-term, positive outlook on growth. Nevertheless, the looming threats of COVID variants, inflation fallout, supply chain disruptions, and even potential economic shockwaves from the conflict in Europe plague the long road to recovery. It is therefore necessary for businesses to prioritize finding better ways to manage their finances and make the most of what they have. Below are a few tips for how to manage this.
Monitor your cash flow
Your cash flow represents the amount of cash spent over a specified period of time, and for what purpose. Many businesses fail because they don’t clearly understand where their money goes; this makes them more prone to overspending, unnecessary bank account overdrafts, or hemorrhaging liquid assets. By contrast, monitoring your cash flow –– coupled with a solid budget –– is the key to mitigating problematic financial patterns.
To determine your financial health according to cash flow, look at business expenses, overhead costs, and sales and operating margins. Review your business reports as well. It may well be that you’ll realize that some clients are consistently late on payments, keeping your cash tied up in unpaid invoices. If this is the case, one customer collection tip is to send your invoices immediately, so that clients have ample time to prepare the payments. Then, send reminders and follow-ups regularly, because many people (and businesses) genuinely forget deadlines.
Review your books regularly
You may be strapped for time, money, or technological capabilities, but all businesses should exercise some form of internal control over finances and monitoring. Establishing internal financial protocols, such as dedicating time to review and update financial information, will allow you to spot potential wasteful spending, unaccounted losses, or even fraud or embezzlement that could lead to expensive legal problems.
Moreover, reviewing your books will help you to better apply agile accounting techniques. Given the curveballs thrown by shifting market demands, the agile methodology helps you to be more adaptable in your financial processes. This framework encourages careful time management and goal-setting, where you plan an accounting sprint that lasts between one and three weeks. Afterwards, agile accounting recommends reflecting on sprint success to encourage continuous bookkeeping improvement.
Invest in financial analytics
Investing in financial analytics essentially means using a company’s financial data to predict and plan for the future. With this detail-oriented approach to your finances, you can shape the strategy for your business through reliable and factual insight, rather than intuition. Generally speaking, modern accounting training focuses increasingly on the application of analytics in evaluating costs and benefits, forecasting future needs, monitoring financial margins, and even checking the creditworthiness of customers. Managing your finances with these efforts in mind will help you to generate the most insightful possible pictures of your standing.
With the development of financial analytics tools, businesses can increasingly tap into technologies that automate these processes as well. One of the most important functions of data-driven financial analytics is forecasting, for instance, and forecasts can typically be generated by tools into which you feed relevant data. Revenue forecasting allows you to model the best- or worst-case scenario for your finances. With this insight, you can make informed decisions.
Explore additional sources of funding
Obtaining additional financing is another way to help improve the outlook for your business. If you’re a new entrepreneur, you can tap into start-up funding by presenting a detailed, precise, and well-researched business plan to investors.
For more established businesses, the path is somewhat less clear. One good option though is to get a business line of credit or a business credit card for short-term financing; build good business credit by paying off debts as soon as possible. For larger projects like renovations, new equipment, or a big marketing campaign, a business loan would be better. While it can feel daunting to take out a loan, the influx of capital will boost your cash flow and lead to business growth. As long as the money is used judiciously, you may stand to experience fewer issues over time.
Ultimately, managing business finances is a difficult challenge –– even in the best of times. With a measured, strategic approach however, you can adopt strategies like the ones discussed above and put your business in a position to weather difficulties and thrive moving forward.
Post solely for the use of doing-business-international.com By Gene Hanson