It’s not easy to run a business. Aside from making sure that your business strategy, marketing plan, and management skills are always on point, you also have to anticipate and survive various crises. An insightful post on Forbes notes how the failure rate for small businesses significantly increases as time goes by. In fact, recent data points out that only one in three small businesses will be able to reach the 10-year mark.
So, how can you guarantee that your business thrives and finds longevity?
One way to make sure that your business succeeds is by knowing how to expertly manage your business finances. Failing to stay on top of your business finances can lead to negative cash flow and other money issues. Here, we’ve listed down some tips that can help you secure your business’ financial health.
Perfect your budgeting skills
It’s impossible to create a good financial plan if you don’t have a comprehensive and robust budget. To start, you should take note of the current industry standards and forecast all of your business expenses. In addition, you should also make use of budgeting programs such as Centage and Scoro to further organize your business finance. As time goes on, you can hone your budgeting skills and eventually figure out how to create one that is tailor fit to your business. However, it’s important to remember that your budget is more than just a plan for where you spend your money, but rather a structure that allows you to make rational business decisions.
Keep an eye on your business credit score
Your business has a credit rating attached to it. This allows lenders and other financial institutions to gauge your creditworthiness in the event that you apply for a business loan. For this reason, it’s important to monitor your business credit score. Not having good business credit will make it harder for you to access financial products such as mortgages, insurance plans, and business loans. A guide to improving your credit score by Petal Card lists down a few tips to help you develop good business credit, such as keeping balances low, always reviewing credit reports, and setting automatic payment reminders. If you don’t want a lender or bank to deny your business, be sure to keep track of your business credit score.
Have an emergency fund
As a business owner, you should learn how to build foresight and be ready to go through slow periods. Despite being a very common occurrence in many small businesses, a lot of owners still fail at getting themselves out of this tough predicament. With that said, you should maintain an emergency fund that will allow your business to run smoothly during prolonged periods of financial distress. Inc. Magazine’s article on building a business emergency fund advises that you need to set a monthly goal, cut back on frivolous spending, and make sure that your money is easily accessible when saving up for money for emergency purposes. If you don’t know how much you should stash in an emergency fund, check your budget and look at how much working capital you need per month, then multiply that number by six. That will be enough to cover your business for at least six months during hard times.
In a previous post titled ‘Why Running a Small Business is So Difficult’, we acknowledge that running a small business is no easy task. If you want to find success with your business venture down the line, be sure to heed the advice we’ve discussed above and learn how to be better at handling your business finances.