How to keep your business financially fit
With so many external factors impacting your cash flow, maintaining your business’s financial fitness can be a challenge. But, with careful planning and good financial habits, you can ensure that your business stays financially fit through even the toughest of circumstances.
Financial fitness is a vital element of business success.
Maintaining a healthy financial position will enable you to trade with confidence, grow your business and achieve your goals. Whilst letting your finances get out of shape can put your business at risk of failure.
Unfortunately, keeping your business financially fit can be difficult due to the number of external factors that businesses have to contend with.
From late payment to unexpected costs and even wider economic circumstances, there are so many issues to overcome that are often outside of a business’s immediate control.
However, with careful planning, effective procedures and good cash flow habits you can improve your financial fitness so that you can overcome these external issues and maintain your success.
To help you better manage your money here are 8 ways to keep your business financially fit.
1. Create a realistic cash flow forecast
Cash flow forecasting is an excellent money management tool which can help businesses to monitor their cash flow and identify when to put plans in place to cover unexpected cash flow gaps.
Yet, despite knowing the importance of cash flow forecasting, many businesses fail to get it right.
It can be difficult to forecast effectively when the numbers are based on predictions rather than actual figures.
But the key is to be realistic.
Overestimating your cash flow can leave you with insufficient funds to meet your commitments.
Whilst underestimating the figures can cause you to turn down opportunities which are well within your capabilities.
2. Regularly update your budget
Your business budget enables you to set out goals, save money, track progress and make your objectives a reality.
Yet many businesses don’t have one or, don’t make full use of the one they do have.
Especially in the current turbulent economy, your budget should be a living and breathing document that grows and changes with your business.
It should be regularly updated with new cash flow projections and realistic spending categories. This will ensure that your budget actually reflects your business and its evolving needs.
3. Review your expenditure
First, analyse your expenses to make sure you’re not wasting money on unnecessary items.
Don’t forget the small expenses. Whilst a few pounds might not seem like much, these small costs quickly add up and become a large expense.
Then prioritise your expenses by splitting them into essential expenses, such as payroll, bills and taxes, and non-essential costs, which aren’t necessary for business success.
Once you have identified the two within your business you can rank them in order of importance.
This ensures that the most critical expenses come first and the others can be put aside until you have enough money to splurge.
If you know you have a big expense coming up, plan ahead to minimise the impact it will have on your finances.
This way, if you need to source additional finance to make the payment, you will have plenty of time to source the most suitable facility for your business.
4. Implement an efficient credit control strategy
Late payment is one of the many factors which can make maintaining your financial fitness difficult.
Therefore, it’s vital that you have an efficient credit management strategy in place to limit the impact that it can have on your cash flow.
Your strategy can include various tactics throughout the credit cycle such as utilising account opening forms and performing credit checks at the start, making courtesy calls during the credit period and even charging late payment interest or outsourcing the debt to a commercial debt collection agency when the invoice is overdue.
The key is finding a strategy that works for your business and ensuring that your team sticks with it to improve your chances of getting paid on time, every time.
5. Have a contingency plan
When your business is suddenly presented with an unexpected business expense or late payment your financial fitness can really be put to the test.
For this reason, it’s essential that you have a contingency plan in place to help you navigate any unexpected challenges and maintain your financial stability.
If your business is lucky enough to have excess profits, it’s good practice to reserve some of this in a savings account so that you can cover unexpected payments.
It can also be useful to identify alternative sources of credit so that you’re prepared when a crisis hits.
As the most suitable finance options for your business will change throughout your business timeline, it’s a good idea to revisit this plan regularly.
As well as this, ensure that you have adequate insurances to mitigate disasters and limit the damage to your business.
6. Make cash flow a company-wide priority
Cash flow management should not be one person’s focus. It’s vital that all of your employees know its importance and keep cash flow at the forefront of their minds.
This ensures that the whole business works together to maintain financial fitness.
To encourage shared responsibility you could budget by department. This ensures that each section of your business is accountable for what they spend.
Also, another good tactic is to incentivise your employees for meeting budget goals so that they have the necessary motivation to stay on track.
7. Optimise your funding
When it comes to your business’s financial fitness your funding facility can be the difference between success and failure.
With the right funding facility you can achieve your goals without damaging your cash flow. But relying on the wrong finance facility could hold you back from reaching your potential or put your business at risk.
This is why it’s vital to regularly benchmark your funding facility to ensure that your finance continues to suit your evolving requirements and that you’re getting the best possible deal for your needs.
With so many options to choose from, finding the most suitable facility for your needs can be challenging but a good commercial finance broker can help with this process.
They will take the time to get to know your business and its ambitions and then use their extensive knowledge of the market to highlight the best options for your requirements.
8. Don’t delay
Every business is different and will therefore need to approach their financial fitness in slightly different ways.
But the thing that all businesses need to remember is that maintaining a healthy cash flow is vital for success.
So, don’t wait to get your finances into shape. Start taking the steps now to ensure that your forecasting, budgeting and spending remain in the best condition possible to allow you to achieve your goals.
As a commercial finance broker we can identify the funding facility which will support your business in keeping financially fit. Contact us on 0800 9774833 or request a call back to discuss your requirements with our team.
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