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8 Ways to Ensure Your Business Is Financially Stable

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8 ways to ensure your business is financially stable

When many people start a business, they have visions of being the disruptor who changes an industry or the innovator who creates one. Financial stability and a steady cash flow, on the other hand, are not nearly as exciting as goals — but they’re both more achievable and, ultimately, more important for long-term success.

For business owners with their sleeves rolled up on that unglamorous but vital task of financial planning, the needs and complexities can be overwhelming. The following eight points form the outline of a basic program of financial stability that can keep a business afloat in hard times or give it the ability to expand in good ones. 

Erp ensure business finances
Financial stability is an ongoing balancing act, the right ERP software can help.

Create a detailed budget and use it as a guide.

No matter the size of the business, a budget is a must-have. Budgets are an essential tool for making leadership decisions because they allow the decision makers to see the big picture of assets, expenditures and more. So although some very small businesses can get by operating without budgets, they’re hamstringing their ability to anticipate and adapt. 

For small business owners who are new to creating a budget, it can be an intimidating process. However, thousands of small business owners successfully do it every day, and detailed guides to creating a small business budget are widely available online. A budget also isn’t carved in stone — most can and will change. The important thing is to have one so that changes can be figured in and accounted for. 

Choose software that helps digitize and standardize the books.

Keeping accounts in good order is critical to a business’s success. But it’s not enough to simply keep records. All accounts and payments, payables and receivables alike, should be standardized within a single system that allows easy access to cash flow data and other essential indicators.

Accounting software like QuickBooks is widely available and highly popular for its easy-to-use nature. However, in the digital age, even many small businesses have found that adopting cloud-based ERP software can be a great option because of the way it standardizes a business’s entire operational process. From bookkeeping and accounting to distribution software to monitor the supply chain, cloud-based ERP now offers all-in-one solutions that streamline and simplify business processes, which can be massively helpful for small business owners who feel like they’re drowning in data and figures.

Stay on top of invoices and don’t wait to send them.

A business that sends prompt invoices sends another message as well: That it expects prompt payment. Invoices that arrive late, on the other hand, can reduce the sense of urgency to complete a timely payment, which can, in turn, create cash flow issues.

An invoice should be sent as soon as possible after the confirmed receipt of goods or services. Business owners should also go through their books periodically and make sure that invoices have been sent for all payments due. Many common invoicing platforms provide an easy way to send reminders for invoices. 

Keep personal and business finances separate.

There are a multitude of reasons why it makes sense to keep personal and business income separate. To name just a few: mixing the two makes taxes enormously more complicated for both the individual and the business, as well as exposing both to financial liability should the business fail, and it also keeps the business from building its credit profile. It can be extremely tempting for the sake of convenience, but it’s ultimately a financial hazard and a hindrance to growth.

Get professional assistance with bookkeeping.

Unless someone in the business happens to be an accountant by trade, most businesses will need at least part-time professional bookkeeping help. At the minimum, an accountant can help file taxes and help ensure that a business doesn’t inadvertently violate any finance or banking laws.

However, developing a good working relationship with a finance professional is a key step toward financial stability for a small business. They can also help provide advice on cash flow, savings, credit management and all kinds of other pressing issues. And the more a business grows, the more indispensable it becomes to have a finance professional on board, so it’s smart to save time and begin a relationship early. 

Work with a local credit union.

Credit unions are a lifeline for small businesses all across America. They’re not-for-profit organizations, which make them a great source of low-interest loans, and they also often charge fewer fees than a traditional bank. They can be an attractive option for business owners who are distrustful of bigger banks.

However, joining a credit union isn’t right for every business — for example, businesses that need branch access across a large geographic area often find that credit unions can’t meet their needs. Since credit unions aren’t bound by the same liquidity requirements as commercial banks, they also often don’t keep as much cash on hand, meaning that commercial banks may be better for businesses that need large loans. But it’s always worth investigating every option when it comes to something as important as taking out a loan. 

Keep risks in perspective when balancing the needs of stability and growth.

A business that puts growth and expansion ahead of stable finances is treading on dangerous ground. That doesn’t mean that entrepreneurs don’t need to take risks and be bold — that, after all, is the essence of entrepreneurship. But every business owner considering expansion owes it to themselves (and their employees) to ask why they’re expanding, and to consider carefully whether it’s the right move.

Have taxes squared away well ahead of time.

Every business owner’s nightmare is to get to tax season and find out that they owe much more than they expected. That’s why it’s important for business owners to begin consulting with their finance professionals as soon as possible about their tax situation. The IRS usually offers options for extensions or payment plans — but it’s important to contact them as quickly as possible to minimize penalties and interest if a business can’t pay.

Small business success with erp
ERP solutions can help a small business run smoothly

These eight aspects are at the core of a business’s financial responsibilities, and any organization that doesn’t give them due diligence is creating major blind spots for itself. The sooner the work of financial organization and planning is done, the more quickly a business can become stable and, in turn, the more quickly (and sustainably) it can eventually grow.

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