5 tips for a financially healthy business
As you grow your business, you need to keep it financially healthy so you’re in the best position to thrive in a competitive market. In this post we give you five top tips to get your business in a solid economic position, covering revenue and cashflow basics, robust financial forecasting, resilience planning, and more.
1. Nail the basics of revenue and cashflow
To get your businesses financially healthy, you need to start with the basics of revenue generation and cash flow. Make sure that you are optimising your revenue generation by setting sales targets and tracking them on a regular basis. Help ensure consistent cash flow by keeping a close eye on your accounts payables and receivables and ensure you have ready access to cash in order to meet your obligations.
2. Engage in sound financial forecasting
As well as properly managing revenue and cash flow, you should also ensure you engage in financial forecasting as often as possible. Your projections should be based on realistic assumptions about future performance that can help you identify where your business stands, allow you to plan and budget effectively in different eventualities, and support informed decision making.
3. Create a resilience plan
You need to be prepared to navigate any financial shocks your business might encounter, whether at times of economic downturn or during periods of rapid growth. You can plan for this by ensuring that you build up financial buffers, such as having cash on hand or ready access to bank facilities. Financial shocks can also happen if your business is growing rapidly without the proper resources to support that growth. Your resilience plan should consider putting the right facilities in place early to support the scaling of your operations by mitigating any cash flow challenges
4. Address your knowledge gaps
As an entrepreneur, you don’t have to be an expert in everything – but you do need to identify key knowledge gaps in your business and bring the right people in at the right times. While it’s important to develop a good level of financial understanding, as a businessperson you should focus on playing to your strengths and bringing in expertise when you need it.
5. Keep an eye out for new opportunities
Good financial health isn’t just about being prepared and having a proper growth plan in place – its’s also about keeping an eye out for new opportunities on the horizon. This involves nurturing your entrepreneurial mindset and having a solid grasp of your market segment, but it also requires having a strong financial position. This means it’s vital to keep a close eye on your balance sheet and have a clear picture of the ratio of your assets to liabilities. Even more important still is the liquidity of those assets and the speed at which you can turn them into cash.
While it can be tempting to withdraw a certain amount of money out of the business to fund your lifestyle, investing money back into your business can help drive future growth and put you in a stronger position to take opportunities as they arise.
All set for success
Growing your business and keeping it protected against potential setbacks is a complex skill that you develop over time. But if you keep these five tips in mind, and reach out for the right support when you need it, you will be in a strong position to get positive outcomes and scale your business.
