Owning a business comes with many advantages and there are many rewards that come a long your way. However, there is some financial stress involved including issues with cash flow to unexpected natural disasters that affect the business.
Fortunately, with the right financial decisions, you can manage through the stress, protect your business’s financial health, and set your business on a path for long-term growth. Keep on reading to find out how to manage difficult situations.
Create a budget
The first step to take to prevent financial stress is to create a budget. Budgeting allows you to get clear of the financial health of your business from your cash flow to your profits. Then you will be able to see where to cut back on spending and increase your margins.
You want to organize your finances into four key categories and track them each month. For example:
- Income: all the money you make each month.
- Fixed costs: these are business expenses that stay the same each month like payroll, rent, utilities, and more.
- Variable expenses: these are expenses that fluctuate each month depending on business performance and other needs, such as gas, electricity, shipping costs, sales commissions, office supplies, etc.
- Projections: account for any future investments, one-time costs, or increased income projections that are in the pipeline.
Get an emergency fund
It is common in personal finance to hear about emergency or “rainy day” funds, where individuals set aside a certain amount of money (such as six months of income) for things like unexpected expenses, or job loss security.
By having a safety net of cash, your business will be better prepared with economic downturn or seasonality.
To find money for your small business’s emergency fund, follow these simple steps:
- Budget for savings. When you put together your budget, add a savings section to your fixed costs.
- Improve cash flow management. Evaluate your cash flow and see how you can keep more cash coming in than going out.
- Consider a line of credit. Financing might be a step you need to take if you find building an emergency fund on your own difficult.
Ask for help
You can get help from friends, family, customers, and maybe even vendors. From purchasing from you to following your business on social media, these people can support your business in several ways.
It can be tricky to ask for help sometimes but it is important to remember that it is okay to ask. Here are some ways to do that:
- Work with an expert: if you need guidance from a financial advisor or accountant to help get your business finances in order.
- Host a fundraiser for your business: come up with a fun way to raise money for your small business. You can also use crowdfunding sites such as GoFundMe, Indiegogo, and KickStarter
- Negotiate payment terms with vendors. If you have good relationships with vendors and suppliers, they might be willing to give you a discount or extended payment terms while you are getting back on track.
Plan for the future
Think about your future and ask yourself where you want to be. Do you want to expand to new locations? Do you need to hire more employees? Will you launch new products or services? Having a plan will set your future up for success.
Part of planning for it means optimizing the financial strategy for your business. We’ve already outlined a number of ways to do this—such as by budgeting, improving cash flow, and getting financing—but you can also prepare with the right business checking account.