Fierce and uneven competition in the market is often the downfall of small business operations. Unlike large enterprises where cashflow is continuously trickling in enabling the repayment of business expenses, SMEs will frequently struggle to pay off debts if they handle their finances in the same manner. For the small enterprise, generating income and having enough cash at hand to pay for bills and expenses is one of the most important and challenging tasks. So finding the right solution to keep cash levels flowing and the business moving is paramount to ensuring successful business growth.
Keep the cash flowing
Cash flow is perhaps the heaviest issue for the small businessman. A profitable next quarter doesn’t mean anything if your workers won’t get their pay packets this quarter. Business owners must acquire an acute sense of timing and budgeting. Revenues must sustain the outflow of cash and replenish for the succeeding quarters in time before other expenses are due. With accurate calculation, the small business owner must be able to keep credit in check while predicting the times ahead, especially if there is significant seasonal variation in profits. If you do find yourself in some cash flow troubles due to bad debtors, you may wish to seek the aid of a debtor finance specialist to give you some help with unpaid invoices and get quick cash injection.
Expect the unexpected
The first few months in a business’s life can drive the small entrepreneur’s finances close to negative, with slim to none profits in the first few years. Businesses can generally handle the slow start as long as they aren’t hit with any sudden financial burdens. A large proportion of your profits may already be going towards office rent and maintenance but make sure you also have the correct insurance policies as the last thing you want to pay for is a large payout if a customer slips in your storefront.
Other like expenses such as government special charges and taxes on businesses and products even the price increase of supplies can also affect the small businessman’s finances. Keep a part of your income for these unexpected expenses. Better yet, anticipate these and keep into account when they are exactly due and how much they all amount to. Being fully aware of all potential costs will give you a much clearer picture of where the cash goes.
Prepare alternative plans when a disastrous event occurs.
In a huge business, the loss of an executive might not be as devastating as it is to a small company; they might just promote a person among subordinates that were groomed to follow and continue running the business. This is not so in a small business; if a small enterprise loses a key person, especially if he or she holds a number of responsibilities, the loss will affect the entire business—more so if the key person is the entrepreneur himself/herself. The business may temporarily stop for weeks, months or extended periods of time.
Natural disasters are also source of business interruption. If that happens, keep your cash on hand ready for any damages that need to be repaired. Also keep business policies in check to know when you can resume business the earliest time possible.
This guest post is brought to you by Scottish Pacific. For more information on business cash flow solutions and invoice discounting visit Scottish Pacific.