When it was first revealed that an estimated 96% of businesses fail within 10 years of their launch, entrepreneurs across the globe could only watch as their jaws dropped to the floor.
While businesses can incur any number of issues depending on their unique nature and the industry that they operate in, of course, there are also universal problems that need to be understood. Many of these relate to finances, whether they’re affiliated with income, outgoings or the fiscal reporting processes that you use.
In this post, we’ll look at some of the steps that you can take to prevent financial issues from undermining your business in the modern age. These include:
1. Minimise Long-term Cost Commitments Where Possible
This may sound obvious, but long-term cost commitments can be a considerable drain on your business. In instances where capital is also spent inefficiently over a period of time, businesses can find it hard to maintain even minimal profit margins.
To avoid this, you should strive to create a lean and agile business model, and one that keeps recurring, long-term costs to a minimum. This means avoiding long-term lease agreements on commercial properties, as well as utilising temporary and contract staff when working on individual projects.
Without this type of model, you’ll struggled to adapt to changes in your business or cope during more difficult times.
2. Regularly Audit your Finances
In general terms, the word ‘audit’ refers to the forensic inspection of your accounts and financial reporting systems by HMRC.
However, firms can also utilise internal audits to review their own finances, helping them to prepare for an official inspection by HMRC and highlight any instances of inefficient spending or inaccurate reporting.
It may be worth having this type of proactive audit performed by an objective service provider, however, with firms such as RSM Global capable of leveraging cutting-edge technology and expert industry insight to the benefit of your business.
3. Avoid Creating a Long-term Cycle of Debt
On a final note, we’d also recommend that you strive to avoid creating long-term cycles of debt in a bid to optimise your initial level of cash flow.
This can be achieved relatively easily, simply by tapping into innovative and accessible sources of credit and maintaining as much equity in your company as possible. So, rather than selling a stake in your firm in exchange for a fixed investment, why not utilise invoice financing and effectively sell your accounts receivable to third-party operators?
This way, you’ll receive payment for any work completed instantly, while negating 30, 60 and 90-day invoice terms. Then, you simply repay the money when your client settles their own bill, ensuring that your businesses cash flow is optimised at any given time.