Are you a startup or small business owner with financial challenges? Here are five smart ways to improve your long-term business financial performance…
Guest post by Lauren Wiseman
Business Financial Performance Of A Company – What You Can Do To Improve Yours
Finances are one of the most difficult challenges for businesses, especially for startups and small businesses. As a matter of fact, many entrepreneurs fail on the market due to lack of funds to support their business or due to financial issues they couldn’t handle. So, ensuring a good financial performance for your business is a key element for success.
However, that’s easier said than done.
Financial challenges are common in the business world and it’s oftentimes difficult to predict financial outcomes. For example, you may run into unexpected costs or you may overestimate your profit predictions. Needless to say, you can prepare in advance for worst-case scenarios and ensure your business has sufficient funding to remain operational.
Listed below are ways to improve your business financial performance.
Create A Better Brand
You can improve your business’ performance considerably by creating a better brand. Choosing a new business names or adjusting your brand voice can attract the type of customers most likely to benefit from your products and services.
Ways to improve your brand include:
- Identifying your target audience
- Developing a unique value proposition
- Engaging more frequently with your customers in an online community
- Building trust by saying what you will do and delivering on your promises
Remember, if your financial performance is lacking, you don’t necessarily have to adopt emergency measures. Often, simply improving your audience’s perspective can boost revenue and enable you to reach more of the people who will buy from you.
Even subtle changes in your website, content, or product-related marketing materials can help.
Consolidate Your Debts: A Key To Better Business Financial Performance
It’s no secret that businesses often have more expenses. If you’re not aware of all your debts, you can easily slip into financial difficulties. Missed payments or late payments can lead to additional fees or higher interest rates, as well as legal issues. These are all expenses you want to avoid in order to keep your business financial performance at an optimal level. To remedy that situation, you should consider consolidating your debt.
Debt consolidation means taking a loan to cover multiple debts and consolidating them into a single larger debt. This may sound bad, but consolidated debt has better payoff terms with lower interest rates and lower monthly payments. In other words, you combine your debts into a single payoff with much better conditions than having multiple debts.
Offer Additional Payment Options
Accepting only a single payment method may be inconvenient for your customers and it may also hurt your financial performance. Most businesses now accept online payments from customers.
If you want to ensure timely payments, you should consider implementing convenient payment methods for your customers. For example, instead of accepting only credit/debit cards, try accepting invoice payments or PayPal payments as well.
Invoices may take anywhere from 30 to 120 days before they are due, but if you need to be paid right away, you can always opt for the business factoring option. The way it works is that you sell your invoices to a factoring company and get paid instantly, while the company collects payments from customers when the invoices are due. It’s a good way to ensure payment receipts and also offer convenience to your customers at the same time.
Improve Your Cash Flow
Cash is the most important business asset due to the fact that it’s your most liquid asset.
Cash allows you to pay for expenses instantly as well as make immediate investments when the opportunity arises. Your cash flow is the lifeline of your business financial performance.
Cash flow is calculated by determining your incomes from accounts receivable and your expenses from accounts payable. If there’s more money coming into your business than going out, then you have a positive cash flow and vice versa.
Ensuring a positive cash flow means your business will be financially stable. For example, let’s say you run into an urgent expense and you must pay $1000. Now, having cash on hand enables you to pay that expense immediately, while having $1000 worth of equipment means you have to sell it first and hope you get a good price for it. That’s why it’s important to improve your cash flow and ensure you always have cash to support your business.
Reduce Overhead Costs
Overhead costs are essential costs that allow your business to operate smoothly.
Overhead costs are:
- Legal advice fees
- Accounting fees
- Travel expenses
- Advertisement fees
And so on.
These costs are not tied to production, labor and manufacturing costs, also called operational costs, which means they don’t yield any return on investment. Reducing overhead costs allows you to improve cash flow and ensure financial stability and performance for your business.
Try to get better deals if you can to cut down on overhead costs or unsubscribe from services you’re not commonly using. That way, you’ll lower your expenses and ensure your business has more funds for development and growth.
Share The Burden
Health care plans are one of the sinkholes of any business. It just costs an arm and a leg nowadays to cover our employees with adequate health insurance. But, there is a saving grace. The MEWA insurance plan or multiple employer welfare arrangement gets businesses to work together and help each other’s employees.
This can be done by sharing the burden of the overall cost, spread out among two or more companies. Your employees get the same kind of coverage but the cost per employee to you the business owner is way down.
Think of it as a consolidation of many health care insurance plans that fall under one umbrella. You should, of course, only try to work with companies that are financially responsible regarding health and safety.
Seek Out Investor Aid
One of the surest ways to improve your business financial performance is to acquire help from an investor. An investor can provide you with enough financial aid to help sustain and grow your business into a profitable enterprise.
Angel investors are willing to support business owners who are passionate about their business. Angel investors often look for 25% ROI for their support.
You can try and secure aid from venture capitalists (VC). They support businesses that have the potential to become very profitable in 3 to 5 years. In return for their support, they will ask for shares of your company.
Both angel investors and venture capitalists require you to have a solid business idea with the proof of concept, and financial performance indicators that you’ll be able to succeed.
How To Improve Your Business Financial Performance
Ensuring your business financial performance is more difficult than it sounds. Financial mistakes can easily lead to business failure if you’re not careful. However, if you realize the importance of positive financial performance, plan well, and prepare in advance, you’ll be able to provide proper funding for your business and ensure its financial stability for the long term.
About The Author
Lauren Wiseman is marketing specialist, contributor to Bizzmark Blog, and an entrepreneur. She helps clients grow their personal and professional brands in fast-changing and demanding markets, strongly believing in a holistic approach to business. Follower her on Twitter.