16 WAYS TO OVERCOME FINANCIAL PROBLEMS IN BUSINESS
Running a business is not an easy task, especially if your business is still a startup. It requires the touch of good entrepreneurial skills and more importantly, great marketing skills.
Since the primary objective of any business enterprise is to make money, you probably want to know how to overcome the financial issues your company might be facing.
Has your business hit hard times and struggling to keep things up and running?
You need to start making some big changes.
You need to find a way to cut back on your spending. Yes, you need to increase sales and start managing your finances better in the future.
Maybe your company can’t raise enough capital to actualize a project, purchase some important equipment or pay employees salary…
Before you start thinking about that again, you need to look at the short term. You need to find a way to keep the business afloat enough to actually make those changes.
This means you need a fast cash injection.
If you can’t find the money that you need to cover your overheads, you won’t survive long enough to improve the business.
If your business is really struggling with financial problems and you need quick cash, here are some of the best ways to find it.
1. Get An Education
Most times, nothing else causes financial problems in business except the sheer ignorance on the part of the business owner.
That is why you must take training courses to help you better understand the market, profit margins, separation of capital and other vital skills that are essential to run a business effectively.
You can get this basic training on the internet through online business courses, or business educational sites like business.gov & other websites capable of providing you with the right information to grow and expand your business financially.
2. Restructure Your Business Plan
Once you have gotten the proper education on how to handle your company finances, it is time to make some changes to the business structure.
If your business has been experiencing this constraint for a long time, it is probably due to a faulty business structure that needs to be repaired.
You need to evaluate the weakness in your business that might have led to reduced profits, recurrent expenditure or a recent expansion. This could cause some serious financial drain on your business, and you must identify what it is.
After you must have discovered your business vulnerability, it is time to appoint project managers that are capable of handling their departments.
If you are running a smaller business, you could eliminate the weakest link in your business and focus on your company strengths.
Also, when you appoint task managers, it helps your business work as an effective system.
That way, more work can be done faster and easier. A business that is not operated as a system is bound to hit rock bottom soon.
3. Check your inflows
If your company is having problems with cash inflow, then you might have a very serious problem in your sales department.
Without incoming money, there is no capital, funds, insurance and you might not be able to afford staff salaries.
You need to pay close attention to your cash inflow.
Concentrate more on debts owed by clients as this is usually one of the main causes of financial difficulties. You need to have an understanding with them on due dates.
You must also take good account of your inventory, you do not want to be buying more than you are selling.
If your financial situation is really bad, I would suggest that you wait until you sell off your current inventory before you make another order from your suppliers.
If you produce your own goods, and you currently have one product in abundance, simply stop its production and focus on another good.
4. Construct Your Expenses
This is very important because it helps you plan ahead.
If you have some payments that need to be made at the end of the month, it is wise to organize them according to urgency and work towards paying them.
You do not want to start scrambling for funds at the end of the month, searching for ways to pay debts.
Some businesses have unnecessary expenses. You must organize your list to eliminate this kind of expense.
Another way to boost your business profits is to find cheaper resources, find new suppliers or negotiate a better deal with your existing supplier.
You might even have to cut back on labour costs, which means you might have to do the unpopular and let go of some employees. This is however more reasonable than making them work and owing them salaries.
5. Use Your Own Money
If your company is at the brink of collapse, you might need to take more stringent measures like investing your personal money into the business.
One of the most obvious ways to get more cash, if you’ve got enough in the bank, is to put your own personal money into the company. If you are confident that you can turn the business around successfully and make it profitable, you could put your own money into it for now. Once things are a lot more stable, you can recoup your investment later.
However, I would only advise you to do this if you are the owner of the business. Also, invest small amounts first to fill in the small gaps in the business until it can properly fund itself again and stand on its own.
It’s ok to fund the business yourself at this point but if things still don’t improve, you don’t want to make it a habit, otherwise, you’ll spend your entire life savings on a lost cause. Sometimes it’s best to admit that the business isn’t going to work out and cut your losses.
It’s important that you understand that there are risks involved here and there is always the chance that you won’t get your money back and the business will still fail.
It’s also never a good idea to take out a personal loan to keep your business afloat. This is because if things don’t work out, you’ll be in a worse financial position. Not just that. You will also have a big loan that you can’t afford to repay.
6. Increase Your Customer Base
Like I previously said, the main initiative of a business enterprise is to make profits.
You cannot have a steady inflow of income without customers buying your product. You must encourage customers to buy and patronize your services.
However, make sure your contact with a customer doesn’t just end with him/her buying your product. Engage them for after-sales services your business might be offering.
Also, you must try to expand your customer base to accommodate more people. Focus on your company strengths and publish your business discounts as adverts on TV stations, radio stations, and billboard adverts.
You must concentrate on your sales and marketing department to effectively increase sales, customer engagement and help get your business out of the financial loop.
7. Sell Some Assets
You would be surprised at the unnecessary expenses your business have been making, once you hire a financial accountant. You might even find out that there are so many assets your company may have stopped using.
If your business has more than two supply buses, consider selling off one of those buses and buy a smaller vehicle.
Take a proper inventory of your warehouse to make sure there aren’t any equipment lying fallow.
If there is, I think you should sell them off and acquire enough money to settle your business debts or purchase more useful items.
If you run a bigger company, ask for a complete list of company assets and go through them one by one, while you carefully grade their importance at this crucial time.
Also, get rid of anything that is costing your company too much like employees staying at expensive hotels while on business trips.
8. Have A Tight Budget
Due to the current situation in your business, you might want to cut back on a lot of luxury.
You might want to recall some official cars you might have given to your employees, change the official accommodation of your employees to a cheaper one.
This will most certainly upset your workers but you must take your time to explain to them where the business is at this time.
Do not attempt to hide this problem from them, this will only just make things worse. Business trips should be on a budget, economy ticket and cheaper hotels.
However, once your employees know that they have a part to play in bringing the company back up, they will put in their best.
9. Increase The Price Of Your Goods
This might seem to look like you are taking advantage of your customers. However, if you do it the right way, you could increase the price of your products or services, and still, provide an added incentive that will be commensurate.
This could also be a good alternative if your business is facing financial problems due to the rising cost of production.
However, make sure your costs complies to the price set to encourage customers to buy.
10. Set Up An Online Store
Since most businesses, these days, are done online, you might want to consider moving your business online as well.
This will help increase your customer base to a considerable amount. You can also give them additional payment options that won’t require them moving out of their comfort zone.
This way, you can reach more people and also earn extra money to keep your business afloat. If you own a store, consider opening a beautiful online store where your customers can shop from comfortably. Have the items delivered to them for a small delivery fee.
If you lack the manpower to properly execute home delivery, consider outsourcing. Hire the services of a delivery company.
11. Invoice Financing
It’s so frustrating when you’re running out of money. However, if you’re to get a few big invoices in the near future, I can give you an idea.
You should look into companies like BCashflow Positive who offer invoice financing services.
They will pay you the majority of the invoice upfront. You can repay them later when the customer pays you. It’s a good way to deal with unpaid invoices and get the money that you need right away. Therefore, your operation is not affected.
12. Find Investors
Finding investors that are willing to back your business is one of the best ways to give yourself a cash injection. This is because they will also be able to advise you on how best to turn the business around.
However, convincing people to put their money behind a business that is already struggling is going to be difficult.
But as long as you put together a good presentation and outline a plan for turning the business around, you should be able to convince them.
If you have a big project to do & your business cannot afford it, you can ask for family or friends to invest.
This is a friendlier approach since it’s family. The pressure to pay back wouldn’t be as much as collecting a bank loan.
It is important that you keep your promise of returns so they can come through for you in the future.
Find the extra money you need to cover your overheads for the next few months & get a much better chance of turning things around.
13. Check Your Energy Consumption
You need to focus on ensuring that you are not using more energy than you strictly need to. Finding ways to reduce your energy consumption is something that you can always do, and which should be easier than you think.
The first place to look is by making sure that you are not wasting energy in any overly obvious ways. If you usually leave the computers turned on overnight, you should stop doing this as soon as you can. You will also find that putting your lights on timers can save a lot of energy in too.
14. Reduce Your Water Usage
Many people forget that water is something that needs to keep an eye on too. The truth is that it is one of the most precious materials on the planet. The less we waste water, the less likely it is that we propel our planet into further turmoil.
You might not have considered really paying attention to the water usage in your business, but if you do so you will help to make things a lot better in a small space of time. What’s more, it’s easy enough to do.
You might even want to think about having water tanks from a water tank supplier to be able to catch rainwater which you can then purify and use. This is inexpensive and is the kind of thing that can add up to make a huge difference.
Have you thought about your partnerships? It’s important too that you make sure you do business with other companies who are financially prudent. If you want to overcome financial problems, make an effort to learn from others. Be partners with companies whose values and objectives align with yours.
If you keep doing business with a company without financial prudence, you will eventually believe in such a system too. By focusing on discouraging that kind of behaviour within your industry, you will be surprised at what a difference that can make over time, and it’s something to think about. This does not mean you should trade quality for quantity. You can have a good standard, yet be financially prudent.
16. Consider Long Term Loans
It is important to note that this is a last-minute approach. It should only be considered if your business is on the brink of collapse.
Do not make the mistake of taking long term loans when your business doesn’t really need one. Long term loans are serious commitments that could come back to bite you if not properly checked.
Discuss with more than one financial accountant on the possibility of getting a long term loan. Also, check if it’s important at the stage your business is.
Are you certain that a long term loan is the only way forward? Then you must negotiate properly with the bank. Discuss a good interest rate and payback period.
If you prefer to pay in instalments, you must come to a firm agreement.
According to research, about 44% of businesses fail after 4 years due to certain constraints. Financial problems are usually the most common.
Poor capital management, overspending and other related causes are culprits that often lead to financial difficulties.
This article has given you tips on how to overcome financial problems in your business.
I hope you will be able to make better financial decisions for your business and set financial goals. Don’t forget to coordinate your staff towards the actualization of that goal.
I hope this helps you to overcome some financial problems. That particular issue giving you sleepless nights has to stop.
What tip amongst these solutions to financial problems do you think is best for you?