Almost one in two small businesses struggles to stay operational by the fifth year. While some businesses build successful strategies and stay relevant and afloat, others experience a slow downfall after their first couple of years. What curse affects them?
The answer is more complex than it might appear. More often than not, business collapse is linked to a variety of factors, including poor marketing and business network. Yet, one of the most damaging issues for a small business is its financial management. Lack of effective fund management can cause small companies to go downhill. Here are five helpful tips to prevent financial mishaps.
#1. Entrust a professional accountant
An accountant can become a trusted and valuable advisor for the business, identifying relevant solutions to save money, apply for government and federal funding, and much more. Unfortunately, only 30% of small businesses bring in an accountant. While there are many online tools available for effective bookkeeping, these do not prevent tax mistakes, missed opportunities, and accurate forecasting.
#2. Choose a business bank
Most banking institutions can provide banking accounts for a small business. However, choosing an institution that is experienced with commercial banking services can make a huge difference to your money. Indeed, you can save costs on extensive services that can match the complex needs of your company. Unnecessary fees or banking challenges can make it tricky for a high activity business to maintain its profitability.
#3. Ban emotional decisions
Entrepreneurs must remain level-headed when they face business decisions. Yet, it can be tricky to leave your emotions at the door. Nevertheless, small business owners need to train themselves to recognize dangerous situations, such as letting stress, anger, or life relationships affect their decision-making process.
Emotions can clog your judgment and make you more likely to choose a project or client that “feels” right. When it comes to business, emotional turmoil can push you in the wrong direction and end up costing a lot of money. Focus on data and not on your feelings when considering your next step.
#4. Pick the right payment term for your business
Payment terms can vary greatly depending on business requirements and the type of industry you work in. Some of the most common payment terms include PIA (Payment in advance), net x days, EOM (end of month), CIA (cash in advance), CWO (cash with order), stage payments, forward dating, and monthly credit payment of one or more month supply. Simple changes such as bringing down the number of days for the payment after the invoice date could make a huge difference to your cash flow.
#5. Work with a professional wealth advisor
Choosing the right investment strategy for your business is not necessarily a problem you can discuss with an accountant. Business-related investments such as equipment purchases are the responsibility of a certified accountant. Yet, what if you wish to create an investment portfolio to grow your business income? Commercial properties, stock exchange, and NFT trading are some of the most popular investment strategies for businesses. Unfortunately, many small businesses fail to build a profitable portfolio because they lack expert knowledge.
Are you ready to bring your business fund management to the next level? Successful businesses surround themselves with experts at every step of the way to ensure they can make good money decisions.
