One of the most common reasons why businesses fail is because of financial problems. Both new and long-time businesses could be a victim of this and encountering financial problems in this field could mean the existence of poor management.
Even popular companies get to a point when they’re already running low financially, and usually, the solution to this is for a business to get a loan or sell a few shares of the company.
Interestingly, FedEx’s owner, Fred Smith, reached a point in the 1960s when the company was struggling to continue to operate because of its fuel expenses. These were the early days and FedEx was in debt of more than $80 million.
Do you want to know what happened when he only had $5,000 left for his business? Well, the infamous owner of this now huge international logistics company flew to Vegas and played Blackjack with the rest of his money.
Smith’s destiny was to continue FedEx’s services and he ended up having $27,000 after his gambling experience in Vegas. That amount was enough to keep his planes flying for another week. Now, FedEx just seems unbeatable when it comes to its line of business.
Now, you don’t need to do what Fred Smith did to save his company. In fact, you can avoid such a problem from happening. Here are a few things that you should focus on as a business owner to avoid getting into financial difficulty.
Funding or Your Capital
If you’re planning to venture into the world of owning a business, it’s most likely that you already have a budget ready. There are still people who would start it with a loaned amount and this perfectly fine.
What really matters is that your capital is more than enough to roll out business. Buying equipment, products, or paying for employees should already be a part of your basic capital. Having more than enough basic capital can make you feel more secured from mishaps and problems in your business.
Of course, you also need to make sure that the business or the ones that you are planning on rolling out are just right for what you have. You don’t need to be an Erik H. Gordon, a CEO and busy entrepreneur to understand this. Meaning, you can always simply start on having just one business until you’re ready to expand or venture into another line of more.
Closely manage the cash flow
Your involvement is actually very crucial from the moment you start your business up until you reach your goal. Being well-involved with what’s happening to your business includes keeping track of the money you’re spending and earning.
If you’re not the one who’s doing the financial report, this doesn’t mean that you should leave it up to the bookkeeper or your secretary. Make sure that this is something you check and feel free to question transactions that you feel like shouldn’t have been on the records in the first place.
Seeing the cash flow of your business can help you know which should be prioritized when it comes to spending money. This could also let you know where you can cut back and lessen the budget on certain things to keep the business running.
If you see that your company is doing well on the financial aspect, then you can start visualizing your expansion with all the money you’re earning. You get to see if you can afford to get a loan or new equipment with simply knowing how the money is moving in your business.
Surely, this is also applicable to closely monitoring the cash flow of your business. While you still should get an accountant, bookkeeper, or a secretary to help you with this if you’re not an expert, you should also consider how you can apply technology to this.
You can purchase software or programs that could help you easily track your business’s expenses and earnings. You should also invest in programs that let you store all the financial data you need so that it will be easy to pull up when there’s a need.
Your banking statements, employment agreements or contracts, or anything that concerns your company should be well-kept. You can still have a file room in your office but going digital will also secure these files.
The last thing you want is to need a bank statement and have a hard time looking for it in numerous drawers. Oh, and only to find out that it has gone missing or was accidentally shredded by one of your employees.