An awful lot of small business owners find themselves working long hours. Often, it is impossible to predict workflow. Therefore, when you do have work you have no choice but to stay late to get it done. For most business owners stopping to measure the financial health of their company is not something that they can easily do, on a regular basis.
Cash flow management is essential
Not regularly taking the pulse of your business’ financial health makes it far less likely that you will find yourself short on funds and end up going bankrupt. Research shows that around 80% of firms go bust simply because of cash flow issues. Often they have customers waiting for their product but do not have the money they need to buy the necessary raw materials to fulfil those orders.
You can avoid putting yourself in the same position, by regularly pulling off cash flow reports and looking a few months ahead. This will enable you to spot when you are likely to run out of cash. When you know there is an issue in advance, you have time to arrange a low-cost loan to cover that shortfall and continue to fulfil your customers’ orders.
It is also important to track the cost of each process so that you can generate reliable profit and loss reports. The information contained within those reports enables you to identify which of the products and services you offer are the most profitable. You will also be able to spot those that are losing you money. Armed with this information you will be able to focus your time and energy in the right places and build an even more profitable business.
Audit your home finances regularly as well
In addition to reviewing your business finances, it makes a lot of sense to carefully manage your personal finances as. Doing little things like checking home heating oil prices before you buy, insulating your home and using coupons will, over the course of the year, save you a huge amount of money.
If you are smart about your home finances as well as those of your business, you should find that you do not have to spend as many hours at work to be able to cover the bills. There really is no point in spending an extra 10 hours at work to fulfil an additional $500 order every month. If your profit margin is around 10%, you will effectively be taking home and extra $50 per month for all of that additional effort. The last thing you need is to be effectively giving that hard earned $50 away to your power provider just because you have failed to shop around and get the best tariff.
Where to find out more
If you want to learn more about how to stop a profitable business from going bust, just click this link. You will need to watch the video as well as read the article to get the most out of the information that is provided on that page.