If you are struggling with your business finances, you may need to take a realistic look at your business and take a few fundamental steps to fix them. There are several reasons why you might be having financial issues such as a lack of financial management strategy, costly spending mistakes and poor business decisions. The economic climate can play a significant role in the failings of your businesses and finances.
These are just a few examples of reasons why you may be running out of cash, but it’s important as a business owner you know how to manage them.
Below are five essential tips to help you fix your finances.
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Be realistic
One of the first things you need to do is take a step back and get realistic about your finances. Pushing the issue to the side will only heighten the problems and eventually cause you more stress in the long run. You may want to get the help of an accountant, and take an honest look at your business revenue. Examine where you could make changes to improve your financial situation.
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Downsize
In earlier stages of your business you may have tried to scale up too quickly, leaving you in a financial mess. If you choose not to go into administration you should consider downsizing your company. If you have a large office space, you may want to consider hiring remote freelancers, working in a smaller office or potentially moving all your business operations to a home office instead. Over the course of the pandemic people have become used to working from home, so it may actually help you free up some capital and pay your debts.
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Start Over
Although you may not want to, sometimes the best thing you can do for your business is start over. The most sensible thing to do is to go into administration instead of battling financial chaos. This basically means that your company will be taken under the management of an administrator, usually a fully licensed insolvency professional.
Going into administration protects your company from creditors who might be threatening legal action against you. Working with a reputable insolvency company will reduce the amount of stress you may face during the administration process.
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Change your business model
Once you’ve gone through the necessary steps to analyse your business finances, you might need to change your business model. You should examine the products and services you offer, as well as analysing your pricing structure to identify the flaws within your business model. Changing the model will attract new clients, and help you retain existing ones.
You may also want to consider adding a loyalty program to your business model to encourage clients to consistently use your products or services.
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Sell non-essential assets
If your business is quickly running out of cash and there doesn’t seem to be any other financial options available, then liquidating non-essential assets can ease some of the pressure that you may be facing.
It won’t be an easy job to determine precisely what assets are essential and which are potentially expendable. However, in a crisis situation like this these actions have to be taken.
This can particularly be the case if insolvency is a real possibility, as your assets are likely to be liquidated under these circumstances either way. Liquidating your assets voluntarily can potentially open up much needed financial flexibility at an early stage. It also helps to ensure that the sale prices secured for your assets are more favourable than they otherwise might be.
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Maintain good relationships
Being transparent and having good communication skills can be vital in saving your company from financial peril. Directors must inform all stakeholders as they should be there every step of the way, moving in the same direction.
Internal decisions and misinformation can be damaging to the prospects of a company. Decisions need to be made clear and specific strategies should be pursued with the full knowledge from everyone involved.
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Get help
It might be hard to bite the bullet and actually get help, but battlining your financial issues single-handedly may result in more issues and more stress for yourself. Consulting a financial expert will help you to work through your finance issues, as they will guide you through all the necessary and vital steps to help save your business.
If you don’t have an accountant, you should find one as soon as possible as they will help you with the decision making process.
You can’t solve your businesses financial problems overnight, so it’s important to be patient. The tips above will help you to understand where your starting point should be, as well as helping you identify the problems that are currently affecting your business.
