Financial difficulties are one of the most common causes of business failure, especially among start-ups. There are always risks involved in launching and running enterprises, but there are steps you can take to protect your investment. In this guide, we’ll outline some top business finance hacks to help you minimise risks.
Research funding streams
Setting up new businesses, diversifying product or service ranges and expanding established companies cost money. Before you make decisions about how to finance your business plans, it’s beneficial to explore funding streams and research thoroughly. Consider different options, weigh up the pros and cons and seek expert advice. There are various avenues you could pursue, including investing to generate cash flow for your business, borrowing money by taking out a loan, using credit, and crowdfunding. Always ensure you make decisions based on your financial status and your business objectives. Some funding options may be better suited to you than others.
Manage your money from day one
Managing money should be a priority for every business owner from day one. Keeping track of your income and outgoings, budgeting and using data to predict revenues and inform decision-making can help you lower risks, identify potential obstacles and highlight successes to build on in the future. If you don’t have the time or expertise to manage your accounts, you can hire professional accountants or recruit employees. Outsourcing accounting can be cost-effective for small businesses and start-ups as it’s often more affordable than recruiting new members of staff. Experienced accountants can offer much more than keeping your books in order. Depending on the services you need, you may also benefit from financial consulting and investment tips.
Take control of business debt
In 2022, over 30% of UK small businesses had debt levels equivalent to over ten times their cash balance. There are different types of debt and it’s not always concerning for businesses to have debts. If you’ve borrowed money to finance growth plans or buy commercial premises, for example, and you can afford the repayments, there’s no need to worry about being in debt. Troubles arise when you fall behind with payments, you find it increasingly difficult to survive from one month to the next, your debt burden increases, or you resort to funding options like credit cards and high-interest loans. Debts can spiral rapidly if you lose control. If you are thinking about borrowing money, research your options and seek professional advice. Use your budget and up-to-date financial data to check you can afford the repayments. If you’re struggling with business debt, get help before the situation gets worse. There are strategies you can use to consolidate debts, reduce interest payments and prevent penalties.
Managing money and avoiding financial pitfalls are common challenges for business owners. Whether you’re launching a start-up or you have an established company, it’s beneficial to be proactive in reducing financial risks. Key areas to focus on include researching funding streams thoroughly, keeping a firm grip on your finances from day one, taking advantage of professional help and advice and taking control of debt.