It’s common knowledge that to live a long life, you need to stay healthy by exercising and watching what you eat. In the same way, the longevity of your business relies on carefully maintaining its financial health, paying attention to your cashflow and organizing your financial records for maximum efficiency. This is especially important if you’re considering a business loan to help expand your operations.
Here are 4 foolproof methods for keeping your business financially fit.
Get Your Finances In Order
The better you know your current financial status, the more able you’ll be to make time and money-saving improvements, as well as plan properly for the future. Without a clear picture of your financial records, it’s impossible to know if you need additional financing or whether you should reinvest and save instead.
Creating regular business reports is the most effective method for keeping on top of your business finances, as well as that of your competitors. You should know all of the basics of your business, such as monthly turnover, profit and loss, inventory data, payment terms and more.
Don’t overlook the state of your cashflow either, as running short of money to pay staff or suppliers is one of the surest ways to stiffen operations fast, whether or not your business is profitable. Most cashflow concerns are the result of late payments by suppliers and customers, so don’t let invoices remain unpaid for long and consider if you have a plan of action for dealing with late receivables.
Regularly Update your Business Plan
Maintaining a 12-month business plan is extremely important to predict where, and how fast, you want to expand your business activities in the near future. A one-year plan will help identify the months when sales are strong and, conversely, the times you may need some financial assistance. Setting concrete goals for future revenue goals will help motivate you and your staff to seek improvements wherever they can be made.
Create an Effective Financial Management System
Maintaining up-to-date, easy-to-understand records of your business transactions is crucial to staying on top of your finances. If your business acumen doesn’t extend to bookkeeping, employ a business accountant to assist you. Whoever is in charge, update records as soon as possible and organize your tax records well in advance of filing a business tax return. If you don’t already own accounting software, this may also be a worthwhile investment. Alternatively, moving all your records to the cloud will allow you to streamline everything from bookkeeping to payroll and logistics.
Assess the Need for Extra Financing
Once you’ve reviewed your business plan, you should be better able to assess whether your business will require additional funding in the future. Don’t wait until the moment you need the cash before searching out a suitable lender or investor. Instead, research the best business financing options for your business and gather the supporting documents you’ll need in advance of any subsequent loan applications.
With well-organized records, a clear growth strategy and some plans for extra cash, you should have everything you need to keep your business in tip-top shape.
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