Do you sometimes feel overwhelmed by the financial challenges your business faces? If you do, you are certainly not alone. Of all the possible reasons for lack of business success, financial challenges are the most common. Here are five common financial challenges business leaders face and how to handle them.
Inconsistent cash flow can wreak havoc on a business and is the number one reason why businesses fail. If more cash is flowing OUT of your business than flowing INTO your business, you need to boost cash flow.
There are many ways to quickly increase cash flow, including:
- Better management of your accounts receivable balances
- Limit the number of customers you offer credit to,
- Change payment terms to get paid faster, and
- Manage your inventory better.
It’s important to implement and maintain proper cash flow management processes. Good cash flow is essential for business success. Make sure you monitor and manage it properly. We can help you put processes in place to help with this if you’d like.
Not Following Your Budget
Some business owners spend hours creating a budget for their business, then proceed to put it in a desk drawer and never refer to it again. That’s a really bad idea.
A solid business plan and a realistic budget will help your business stay on track, but only if you use it properly. Using a budget helps you actively manage your income and business expenses in real-time, giving your business a solid blueprint for success.
Insufficient Working Capital
Working capital is as important to business success as cash flow. It’s difficult to grow and invest in your business without the necessary capital in place.
Having sufficient capital is one of the biggest challenges small businesses face. While some businesses are lucky enough to have angel investors willing to fund operations, the majority of business owners start their business using credit cards or bank loans. Our advisors are experienced in helping businesses solve their working capital issues.
You’ve created your budget, you monitor it regularly, and you spend wisely. But no matter how careful you are, you’re likely to be hit with unexpected expenses. Whether it’s unexpected storm damage, vandalism, or a leaky roof, unexpected expenses can severely impact even the most careful financial planning. The best way to prepare for unexpected expenses is to pad your budget, and implement good internal controls, including risk assessment, so the surprises are not so surprising.
Taxes and Government Compliance
As a small business owner, there are a lot of different taxes you’re responsible for, regardless of your business structure. You pay taxes on profits earned for the year. Tracking your expenses properly enables you to use some of those expenses as deductions, which can significantly reduce your tax liability. This is the case whether you’re a sole proprietor working out of your home or a corporation with dozens of employees. You’ll also have to pay employment tax for all of your employees as well as the employer portion of both Medicare and Social Security.
We have Certified Tax Planners on our team who can help you minimize your taxes, and, because our tax planning services are forward looking, we usually can reduce the number of cash flow and working capital issues you face throughout the year.