A Simple Guide to Getting Your Corporate Finances Back on Track
From time to time every business feels some financial stress. It’s not always due to a market downturn or lack of sales, sometimes it can be that your company is growing too fast and you have a cashflow issue. Whether you are experiencing money worries or not, this article will provide some simple tips to get you back on track or help you prepare for growth.
Assess Your Situation
Financial stress usually originates from a feeling that you are no longer in control and that comes from not having all the information at your fingertips. Regardless of whether or not you are currently in the financial weeds, taking the following actions will help you become grounded.
Be honest with yourself. Don’t try to fool yourself that it will all be okay in the end. Putting their heads in the sand doesn’t help ostriches, neither will it help you. Of course, the ostrich thing is a myth (they bury their eggs in the sand and the parents take turns to rotate them, thus they just look like they have their head buried). But you get the point.
Discover what the real issues are and if there are no issues, find out where you can increase profit. There is always a way. Here’s a short list to get you started thinking in the right direction.
Out of control expenses (almost every business can cut costs)
Too many staff
Not enough staff
Pricing is too high
Pricing is too low
Profit margin is insufficient
Suppliers overcharging (or there is a less expensive alternative).
In short, do an audit of your business’s finances. You will be surprised what you will discover and how much you can do to right the ship if it’s off course.
Get Real and Take Control
If you don’t understand your financial statements, the first thing you need to do is get your accountant to explain them, or simply go online and find a few YouTube videos that explain the ins and outs of an income statement and a balance sheet. It’s not rocket science, you’ll be surprised at the simplicity of these documents. You will be even more astounded at how useful they are in running your business profitably.
Create a Budget
Budgets are worth their weight in gold. The first one you do is based on what you currently spend, later your assumptions will be based on future spending. They will need constant adjustment, but as you add more and more months of figures, and then years, their accuracy will improve and the more useful they will become. Once you have done a thorough audit of your finances, you will be able to see where you need to cut the amount you spend, and where you might perhaps need to add some dollars.
Bringing your finances under control can be tough so don’t try to go it alone. Talk to your accountant. Get a mentor who knows about the financial side of running a business. Perhaps, hire someone to manage your finances. There is a caveat to this last point: you need to understand your finances and know how to read financial statements before hiring anyone.
If necessary, go and see a credit counsellor or debt management specialist. Not everyone is good at handling money. If that describes you, then the best thing you can do is find someone who is to help you.
Bring More Money In
The most common problem when there are financial woes is a lack of cash flow. If you are short of cash, look to your accounts receivable and call every client who owes you money, whose payment is overdue.
Make more sales by reaching out to every old customer to see if they need anything from you. This is often fertile ground for sales. Incentivize your sales team to bring in more orders – sometimes a simple team competition with a prize, such as two nights away at a fancy hotel, can stimulate sales and increase revenues.
Look to Profit
Often when finances are bad it’s because you are not making enough profit. Analyze your net profit. If it’s not high enough to meet your needs, you may need to increase your prices. If that is tough in your market, look to see if you can get a better deal from your suppliers. In today’s fast-changing technology world, you might also look at ways to automate to save money. Above all, be creative, be innovative.
All businesses leave some money on the table; that is money that could be yours if you have an auditor’s mind and know where to look.