3 Ways to Optimize Your Business Finances
As we all know, cash is king.
According to a U.S. Bank study, 82 percent of businesses fail due to poor cash flow.
Therefore, it is crucial for business owners to implement systems to manage their finances. By adopting processes to manage cash flow, automate payroll, and access capital, you will increase the probability for your enterprise to succeed.
Here are 3 ways to optimize your businesses finances.
Build a forecast
Forecasting is a valuable tool. It is your best guess at the income and expenses that your business will generate in the future.
You are not trying to arrive at exact figures; rather, you are creating estimates. Start with your current cash flow statement. Next, research the factors that contributed to the statement. Take a look at your accounts payables and receivables. Are your customers paying on time? Can you negotiate more favorable terms with your vendors?
Armed with this information, you can make an educated guess on where you would like your revenue and costs to be at the end of the month, quarter, and fiscal year.
Leverage your accounting platform
Evaluating financial data is a critical component of your strategic planning process. If you haven’t yet streamlined your accounting processes, you could be hindering your business growth.
According to the 2017 Viewpost SMB Emerging Trends in Accounting Report, 18 percent of small and medium businesses do not use accounting software. Of that 18 percent, it’s safe to say that they are not optimizing their cash flow.
Decision makers would benefit from utilizing a cloud based solution, like QuickBooks Online or Xero, to manage their finances. These platforms also integrate with third party apps to provide you with analytics, KPIs, and metrics.
You can even reduce your costs and administrative burden by integrating payment solutions, payroll and HR functions with your accounting platform.
Keep a line of credit on standby
Access to capital has long been a challenge for many small business owners.
There are many factors ranging the reluctance of traditional banks to lend to smaller firms to the inadequate financial position that many owner-operators are in.
SMBs must proactively search for new sources of capital. Alternative lenders, such as community development financial institutions or CDFIs, can provide term loans and lines of credit to emerging growth businesses. These products usually offer flexible underwriting and attractive rates and terms.
They are a great way for a business owner to establish a commercial credit profile to leverage its purchasing power.
Prudent financial management is the cornerstone of business growth. It is also one of the most challenging tasks that business owners encounter.
By working with an advisor to help craft a strategic plan, forecast growth, and streamline your operations, you’ll free up valuable resources that will make optimizing your finances simpler if not a more enjoyable part of your entrepreneurial journey.