When was the last time you evaluated the financial health of your business?
A thorough analysis of your company’s financial statements can provide you with one of the most important indicators of its success or failure. If the latest review of your company’s financials revealed some disconcerting results, or if you are just looking for ideas to improve your company’s financial health, there are many strategies you can employ to do so. Below are five ways to help ensure your company makes it through 2015.
1. Ensure adequate capitalization
Undercapitalization is the primary reason that businesses fail, and it can be caused by a number of factors. Financing expansion with short-term capital, failing to recognize a distinction between the finances of personnel and the business, and taking a lackadaisical approach to managing cash flow are only three that will lead a business to undercapitalization and ultimately, failure. Explore your options for capital sources whether they be personal savings, private investors, small business loans from traditional banks, SBA loans, or crowdfunding platforms such as EquityNet that give you the power to connect with a multitude of accredited investors.
2. Reevaluate your cost structure
An evaluation of your supply chain and other support services could reveal more cost effective alternatives to help you run your business. Conduct your own market analysis to determine where you fall in with your competitors and focus on those companies who are leaders in your industry to see how they have streamlined their operations. Based on your research, you will be far more prepared to seek new avenues to a better operational strategy.
3. Improve capital turnover
You may consider restructuring your payables and receivables schedule. This is the least expensive tactic you can use to improve your overall cash flow. Maintain a regular invoicing system and stay on top of past due receivables. Extend the amount of time that you pay your expenses, but not to the point where you could invite late fees, interest, or other penalties. Bear in mind that if more than 30 percent of your payables are over 90 days old, you risk your company’s future unless you have matching revenue to support the deferment of your payments.
4. Renegotiate your existing loan terms
If you have performed a thorough examination of your cash flow situation, as mentioned above, you should have a good idea if you are receiving payments in a timely manner and if your current revenue can support the amount of debt you have. It could be possible to convert your short-term debt into a manageable long-term plan to free up capital for immediate or short-term applications. This is only advisable if you can realistically forecast long-term revenue growth.
5. Consult a financial expert
Much like a good attorney or accountant, a seasoned financial consultant can be an irreplaceable asset to your company. Look for a professional with a solid reputation in the industry backed by years of experience and has the expertise to fully understand the nature of your business and the market you operate in. Find out how he or she charges much for his or her services and determine how much you are willing to pay for them. Look for an individual who is genuinely interested in what you do, and is easily accessible to assist you with any questions or concerns you may have.