Money, cash, capital – no matter how you call it, this resource is what keeps your business running. If you don’t manage it right, you’d be in big trouble. Forbes reports that 90% of startups fail – and the last thing you want is to be part of that statistic.
How? It all begins with proper cash flow management. You have to take a second look at the way you run your business and make sure you are not doing any of the following:
Incurring High-Interest Debt
Don’t depend too much on credit cards when running a business. Although these pieces of plastic seem practical, the sky-high interest rates can bite you from behind. Once you have your company up and running, do your best to stabilize the cash flow.
Of course, there are times when borrowing money is inevitable. In such a situation, it helps to look at your options. ProvincialBank.com suggests looking at commercial and SBA loans. Consider credit cards as a last resort to avoid those high interest rates.
Giving in to Impulsive Purchases
At one point, you will have to acquire assets for the business. Nonetheless, you shouldn’t buy new equipment or transfer to prime locations out of impulse. You have to rethink what you’re doing. Before you say yes to a new expense, ask yourself these questions first:
- What are the benefits of this purchase for the business in the long run?
- Are the company’s finances stable enough for such an expense?
Remember that when you’re still starting, the most purchase-worthy assets are those that generate positive cash flows. Anything else can wait until your finances are no longer shaky.
Allocating Resources Disproportionately
Think twice before allocating your resources. Although some areas of the business require more capital, you have to avoid allocating too little or too much to all the other aspects of the venture. Make sure that every side of your business has the right amount of resources to function properly.
Failing to Make a Cash Flow Projection
How do you foresee the finances of the company a few months from now? If you have no clear answer to this question, you might want to revisit your cash flow projection. If you don’t have one, it’s time to consult experts about it. Not having any knowledge on possible future expenses makes you vulnerable to other unforeseen circumstances that may ruin your business’s resource allocation.
The financial stability of your business depends on whether or not you’re guilty of these blunders. Review the way you handle your capital to ensure that your company remains afloat and growing.