5 financial strategies for a healthier business

These past six months have seen us weather complete shutdowns, food by takeaway only, quiet streets, and everyone working from home - all of which have put an incredible strain on business finances everywhere. But it does serve as an opportunity for SMEs to reassess their financials and invest time in finding strategies to protect their futures.  

Now is the time to put both feet in and set your vision on growing your business. There are five things you can get started on today to secure your future.

Control Costs

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Day-to-day, the goal is always to keep the lights on and the doors open. One of the main drivers of business success is a consistent and constant cash flow. The main driver of cash flow is not always income, but rather costs. Whether it is the costs of product development or equipment, everything needs to be analysed to ensure all expenses provide a strong enough return to remain a part of the business. Anything not profitable needs to be seriously considered for elimination.  

 

Manage Liquidity

If your business has been running a slim cash flow this year, you’re not alone -  a strong business typically operates with continuous and significant cash flow. This ensures your ability to pay employees and pay taxes, remain current on creditors/vendors whilst investing in the business when the timing is right. That could mean when the recession ends or in the near future when an opportunity presents itself. Maintaining a right-sized cash balance is a major key in building a healthy business.

 

Manage Your Taxes

Two things we know for certain: death and taxes. Both can be painful but the latter, with the right planning, is just another part of running a business. While tax law is very complex and can sometimes produce major unexpected expenses, building a plan now for your taxes can ease any future pain.

With planned tax strategies, you can take advantage of tax deductions like those related to research and development. Depending on the type of work and research (and there is a wide breadth of opportunities here), you may be entitled to more tax deductions than you think.

Also, while your cash flow may be strained, making larger purchases/expenses this year may be advantageous to your final tax bill. Doing so may have the effect of lowering your tax bill and helping your business at the same time.  

It is advisable to work with a reputable finance broker to build the best strategy for your business and to ensure you don’t miss out on any hidden benefits and breaks.

 

 

Explore Different Financing Options

Many businesses begin their funding journey with a traditional loan from a bank or even with a personal loan from their own savings and retirement accounts. Sustainable businesses often have to finance their growing businesses with creative strategies. All strategies have costs associated with them and should always be taken into consideration when deciding how to finance operations for the short, medium and long term.

Many businesses, especially service-oriented businesses have a lot of cash locked into invoices that are unpaid. This costs you money because you can’t tap into those funds - which you’ve earned - until your client pays the bill. Invoice finance is a simple process where a broker partner funds a percentage of the total invoice until it is paid. This provides you with immediate liquidity to sustain and grow your business.

In a tight economic climate, outlaying large sums of money for high-cost equipment can be risky. Instead of a cash loan to purchase the needed equipment, the loan is secured by the asset itself with asset financing. These loans typically are managed like a “lease” in that you can claim the item as an asset, but you don’t own it until the loan is paid off. This approach maintains cash while providing a needed business asset.

 

Manage Risk by Outsourcing Financial Strategy

There are business risks around every corner of your business, and from outside sources. The key is managing that risk to ensure the business remains in a strong position financially.

Risks come in many different forms; you can have threats from competitors, technology, and in this period, a pandemic or a recession. Also outside of your control are financial risks which include changes in interest rates, liquidity changes, and a volatile stock market. 

Now is the right time to find an experienced financial partner to work through this difficult time who can help establish and execute a strong financing plan. To learn more about building your strong plan to propel your business forward please contact us.

 

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