How would you define your company’s financial health strategies? Most entrepreneurs have the misconception that corporate financial health is reduced to making sales. If you want to run a profitable venture, you shouldn’t be one of them. Keeping your company on a solid financial footing and properly managing your funds are challenging tasks. But also essential aspects of business ownership. Sadly, 50% of small businesses fail within the first five years.Â
What factors lead to their failure? Research shows that a series of triggers can impact business success, but financial health is among the most important ones. Financial health is essential for your ability to start, run and expand your business.Â
Top 5 – Best Financial Health Strategies for Entrepreneurs
As you can see, keeping your venture profitable requires more than selling your products. This article presents some recommendations on financial health strategies for entrepreneurs and how to make your company thrive.Â
Keep Track of Finances
An effective way to ensure your company stays solvent is to keep track of your numbers, such as payroll, revenue and overhead. You may use the excuse that you’re not a numbers person. Well, then you should invest in accounting software because it does the job for you. The software removes the need to learn to read balance sheets and spreadsheets as it tracks all financial activities to provide you with reports to help understand how profitable your business is.Â
Part of knowing your numbers is identifying the best methods for driving sales. For example, if social media marketing triggers higher sales, invest in sponsored social media ads and hire a social media specialist to create campaigns. Make sure you also track how much you spend and keep an eye on your return on investment. The data helps you determine if you should make the same expenditures next time.
Keep Up With Billing
Your business needs money in order to stay afloat. So, it’s crucial to ensure payment for your products reaches your bank account as fast as possible. Sending invoices in time enables you to register payments faster. Schedule time in your calendar to get the invoices out.
The longer it takes you to send invoices, the longer your clients will take to pay the bills. If you struggle to send invoices weekly and they pile up on your desk, automating the process may help. Look for different types of accounting software that includes invoicing features and recurring billing. Automated tools allow you to set recurring bill payments and send them in time. Keep in mind that late balances and payments mean late interest and charges that can quickly drain your funds.Â
Besides ensuring your clients pay the invoices in time, you should also promptly pay your business taxes. Automated financial tools help you keep up with monthly bills and set up an automatic bill payment from your corporate bank accounts. When you integrate accounting software in your business processes, you can rely on Making Tax Digital (MTD) which makes VAT submissions easier and promotes removing paper records and spreadsheets behind. HMRC introduced it to help companies get their tax right, but it’s essential to use compatible accounting programmes for it to function.
Separate Your Finances
Some entrepreneurs use their personal savings to fund their ventures, and while it’s a great practice, you should ensure you set some boundaries as your company grows. It’s recommended to establish your company as a separate legal entity to protect your personal assets if your business faces a lawsuit or deals with financial issues. Having different bank accounts and best credit cards is advisable because it allows you to separate your business expenses from your personal ones.Â
Pay yourself a salary and cover business expenses from your corporate bank account. Don’t use your personal card to purchase materials or cover bills for your business, as it’ll be challenging to track spending.
Work With a Profit Expert
Successful companies are about producing profit, so working with a profit expert could benefit your business. Besides promoting your company, your business’s production and accounting processes are also essential parts. Work with a profit expert who can handle all these tasks to ensure business success.
As mentioned earlier, you can use automated accounting tools instead of hiring an accountant. However, it’s essential to have some understanding of what the financial data in the reports is telling to make informed business decisions. Whether you work with an accountant or not, ensure you have your accounting process in sync with the profit expert because they need the information to identify profit opportunities, increase revenue potential, and save money.
Manage Your Budget
Several of the small businesses that go bankrupt in their first five years cite cash flow issues as the main leading factor. ISo it’s crucial for your business’ financial health to identify any challenge before it becomes lethal. Managing your budget properly allows you to prevent chronic issues.Â
Managing your budget implies knowing how much revenue your company must generate to cover expenses and make a profit because you want to make revenue at the end of the day. You should also monitor your cash, credit, inventory, expenses, and income periodically to adjust and rebalance on the go. If you need extra funds to cover some expenses, check if your cash reserve allows you or if you need to take out a loan or line of credit.
Many entrepreneurs make the mistake to invest all resources into their business. However, it’s best to maintain a cash cushion between your business needs and personal finances because the last thing you need is to experience a cash flow crisis.Â
Conclusion
Even if running a financial health strategies for business isn’t rocket science, it requires plenty of discipline and effort as an entrepreneur to track your company’s health. In some cases, it implies learning and mastering some business management skills and in others using the right tools. Whatever your business needs, make sure to identify it in time to keep it afloat.Â
