There’s a popular saying which goes, “An ounce of prevention is worth a pound of cure.” This saying is true for many situations, and it is true for your business operations and your business finances as well. Take your business cashflow, for instance. Managing your cashflow is difficult, but it is always better to be prepared for whatever eventuality or circumstance, as it is easier to address potential issues and problems before they occur rather than deal with them when they come.
Following are some tips for identifying and predicting cashflow issues before they occur:
Always be up-to-date with your accounts and budget
It is in your best interest to be up-to-date with all your accounts and budget. To do this, always keep a record and keep track of the actual business figures you have as well as compare these figures with your business plan or budget. If there are any inconsistencies, keep track of those and try to find out the reason for those inconsistencies (some reasons may include seasonal changes or demands or economic issues).
Always be knowledgeable about any outside changes or developments
Keep yourself informed about any changes in the business climate and economy. This would include being aware of exchange and interest rates, as these can affect trade in general. For example, if you are transacting business with other countries, then keep yourself abreast of foreign exchange rates at all times.
Another development you should be aware of is the competitors you may have. You should keep yourself informed of both your existing competitors and new competitors and have a good idea of their strengths as well as their weaknesses. Being knowledgeable about outside changes also includes being aware of new innovations or technologies related to your industry. When you know the trends and new developments in your sector, you will be able to create a more realistic forecast and budget plan.
Work with the right lenders or financial services
As a business, you would need to have a good relationship with financial institutions, such as banks and lenders. If you are looking for financing, carefully consider the options which are available. You can borrow money from a bank if you would like to invest in certain assets (such as machinery and equipment) for your business, or, better yet, you can take advantage of asset financing from cashflow specialists like Ultimate Finance. With asset finance, the cashflow expert will purchase the asset for you whilst all you have to do is make fixed payments every month. This way, you do not have to touch your available cash and you still have capital to run your business.
It is also important to keep your financial partners informed of the status of your business. This way, they may also be able to help you if you seem to be heading into financial difficulties.
Learn if your clients or customers may be having financial trouble
If you rely on only a number of customers for your business, it is even more essential to keep yourself abreast of their status. Some signs that a client may be heading for financial trouble is when you see a negative change in their pattern of payment; when they make mistakes on the cheques that they provide you with; when they do not seem to want to talk with you; or when their orders for your goods or services are less than usual. You can also keep yourself informed about your clients by speaking to other players in your industry, or even some of your competitors.