While small business startups do an amazing job of fueling the economy, it is unfortunate to note that it is not a guarantee they will always succeed.
In fact, a study conducted by Bloomberg indicated that a whopping 80 percent of businesses bite the dust within the first year and a half.
That’s a pretty dismal statistic for aspiring entrepreneurs to take in.
The fortunate thing is you don’t necessarily have to part of the statistics.
If truth be told, one primary reason many business ventures fail can be attributed to poor financial planning and management.
Undeniably, proper financial planning and management are critical if you want your business not just to survive but also thrive.
Unfortunately, not all entrepreneurs are financial experts.
If you think you can use some savvy financial advice, below are some tips that can effectively help your business maintain viability, generate revenue and stay afloat:
Track your cash flow.
Sure, consider needing SME financing help inevitable at one point or another.
However, you should not make it an excuse not to monitor your cash flow.
Simply put, cash flow refers to the movement of the money in and out of a particular company.
Always make it a point to perform a routine review of your cash flow statements so you will be able to accurately pinpoint the areas where the company is making or losing the most money.
Analysis of the cash flow should also be considered an integral part of operating the business as it gives you an insight into the company’s gains and losses.
More importantly, it will give you ample time to address and resolve financial issues before they get out of hand.
Create a budget and adhere to it as much as possible.
A budget can help you in more ways than you can possibly imagine.
For starters, apart from helping assure you won’t be needing SME financing help as often, a budget can significantly reduce unnecessary spending, increase reserves, and help you effectively keep track of the cash flow.
While creating a budget can seem both overwhelming and complex at first glance, nothing can be farther from the truth.
In essence, creating a budget will only entail that you itemize all of the expenses of the business and assign a monetary value to each.
The value you should set should be the maximum amount you are willing to spend for the month or year, depending if you are creating a monthly or annual budget.
Once you’ve set the budget, you should make it a point to stay within the financial parameters you have decided on.
Spending more than what you have allocated can cause your business money so think twice before you deviate from the original budget you have set.
Set realistic financial goals.
Every business should have financial goals in place as it can help guide everyone in the organization in terms of what to strive for, what to give their focus on, and what their expectations should be.
However, you have to do more than just set financial goals.
You have to set sound financial goals.
Otherwise, you’d just end up wasting your time and setting your business up for failure.
To effectively set sensible financial goals, you need to first accurately determine the company’s current financial position.
Once you are able to gauge where you stand financially, the next step would be to identify where you want it to be in the distant future.
Last but not least, you have to come up with ways so you’ll get where you want to be as well as ways to check if you have reached the financial goals you’ve set.
Dollar values, milestones, and timeframes are just some of the measurable elements that you should include in your financial goal setting so you can gauge if you are where you want to be.
Start out lean.
If you are just starting out and barely making any revenues, it would be a good idea to stay lean, at least until such time when you can afford to be truly extravagant.
In other words, a few months into the venture is not the ideal time to purchase fancy equipment or splurge on lavish business trips.
As a general rule of thumb, cut on as many costs as possible, especially during the early stages of your venture.
If you need to shell out money, make sure it is done in terms of investment as opposed to just mere spending.
Prior to making purchases, take into account the potential return of investment.
If the planned purchase will bring in revenue, consider it money well spent.
If not, find a more affordable option or gauge if it is something you can do without, at least until such time when you can truly afford it.