Many small businesses are blessed with impressive customer services, soaring sales and superb products. However, this may not guarantee a long-term success. It is still possible for the company to suffer from a severe financial crisis. We should have a sound and stable financial position, to prevent our business from crashing to the ground, so hard that it will shatter to pieces. It is important to make sure that all our hard work isn’t in vain.
- Improper record keeping and administration: In many cases, business owners are really great in their products and services offerings, but they are not really good record keepers. When it is time to deal with finances, they will grumble in the morning, saying “Great, it’s a paperwork and VAT day today!”. If we want to keep our businesses on a straight path, we should accept the fact that book keeping and administration is essential for smooth operations. Without these records, it is possible that we will lose track very quickly. We won’t know where we have spent our money and we won’t know where our cash is going. The problem can be serious enough that we may think that someone have stolen our money, when it fact it is caused only by miscalculations and bad record keeping.
- Unmonitored bank balance: We should know the proper bank balance for today and we should know why it is important. As an example, if we want to write a cheque, we should know whether we have enough money on our account. If we don’t do that, bank manager could bounce it. This will have a significant effect on our reputation. It is possible that our credit will be ruined and getting support from the bank can be quite difficult. This could happen if we don’t check the balance. We should make sure that we keep a running total in our cash book. It is also a good idea to sign up for Internet banking.
- Poor credit and cash management: This is also related to keeping an eye on our bank balance and we should know how to handle our cash flow. We shouldn’t be tempted to keep too much money at our business premises or home. We could lose the money to flood, fire or robbery. If we do B2B sales, we could face an issue related to selling on credit. If it happens to us, we should be persistent in chasing all outstanding payments. It would be embarrassing to ask for a cheque. If the agreement says that we can get the fund in one month, why should we wait for three months. We should remember that we need to pay our own debt and having delayed payments can be damaging for any small business.
By ensuring the above factors, a thriving small business can always have a strong financial situation. We need to have an upper and lower limits related to essential financial factors.