You’re not alone in experiencing highs and lows with your business. Every business has ebbs and flows.
The trick is to prepare for the low periods. There are times when sales are down and days when there is a low demand for your products or services. Things slow down and your income all but dries out.
Here are five ways to improve business finances to help you weather the storms:
1. Use a factoring service.
If you extend customers credit, you may have more money going out than coming in. Sometimes you may have to wait as long as 30 to 60 days to get paid. Meanwhile, you still have to pay your bills.
Fortunately, it isn’t necessary to get a high interest loan to manage the crisis. A much better solution is to bring in a factoring service to make sure your bills are still paid. TBS for invoice factoring gives you cash for your invoices and then collects the money from the client. They wait for the invoice to be paid so that you don’t have to.
2. Create a reserve account.
While it may be tempting to use the money you have left over to reinvest in your business, it’s wise to set aside 10% of all you earn into a reserve account for emergencies and opportunities.
You may have days with unexpected slow sales leaving you with insufficient money to pay your expenses. You may have an expensive piece of machinery that breaks down and needs to be repaired or replaced quickly.
You will have the money to go to a seminar if a well-known expert in your field decides to make an appearance in your town. You will have the money to get better equipment for your business if a competitor goes out of business and has a liquidation sale.
3. Automate tedious work
There are many tasks that business software can do to relieve the tedium of administrative tasks. Choosing high-quality small business software for accounting, collaboration, and managing customer relationships can make your work easier without hurting quality.
In fact, the software may do things more efficiently than a person. Human beings are creative and get impatient with the granular intricacies of balancing figures.
4. Apply management theories
There are many excellent management theories that you can apply to your business, like the Theory of Constraints and the idea of Best Practices.
Theory of Constraints
The Theory of Constraints (TOC) originated from looking at problems in the manufacturing process. Management scientists noticed that manufacturing processes had unexpected bottlenecks that slowed the entire plant down. Analyzing the manufacturing process from the conversion of raw goods to finished products, they would identify a slow machine or an inefficient worker. This bottleneck was slowing down the entire assembly line. Once this constraint was removed, everything flowed quickly again.
Look at your business and see if you can find any constraints to your finances. Perhaps you have customers who are bargain hunters and don’t appreciate the value of your products. Your constraint is that you are not getting paid for the value you provide. It may be time to advertise your value better and attract customers willing to pay you for what you’re worth.
Perhaps you have chosen the wrong suppliers. They may be overcharging for poor quality. Your constraint is that you are paying too much for too little. It may be time to shop around for better suppliers.
Perhaps you have eager but untrained sales people. Your constraint is that you are not generating enough revenue. It might be time to hire an experienced sales manager to train your sales people.
In business, there are best practices for almost everything you do. Take a look at your business processes and see what might be working less efficiently than you desire.
Once you’ve identified inefficient business processes, then research how other businesses like yours handle that particular procedure. You will come across some best practices that will improve the way you do things.
6. Hire a rainmaker
Ultimately, every business is only in one business: the business of marketing. It doesn’t matter what product you’re selling or service you’re offering, if your marketing is average or below average, your business will not flourish.
The idea of people beating a path to your doorstep because you have built a better mousetrap may have been true in the early days before the Industrial Revolution.
Since the age of craftsmanship is now long over, it’s difficult for a consumer to distinguish the quality of one product over another one. Is Coke better than Pepsi?
It may be well worth spending the money to hire an expert marketer or marketing company to launch advertising campaigns to make the public aware of the high quality of your products or services.
Although you may have an excellent product or service, you may need some expert help in letting people know why it is as good as you think.
Stick to Your Vision
Your vision of what was possible may have been shaken up by the realities of the market, and you may have lost money in pursuing ideas that did not work out. Despite these setbacks, stick to your vision through good times and bad. It is the silent helmsman steering your ship of enterprise.