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The rate of small business failure remains alarmingly high, even in a digital age that supposedly empowers aspiring entrepreneurs. So despite the fact that it has never been easier to launch a startup venture in 2018, just 40% are still trading after five years of operations.
Interestingly, the rate of small business survival after the first year is relatively high at 91%, but this begins to decline considerably as ventures progress and continue to age.
Much of this to do with financial mismanagement, particularly in instances where firms try to expand quickly at a disproportionate rate to revenue.
In this article, we’ll look at three simple ways in which you can manage your company money and achieve sustainable fiscal growth.
Avoid long-term debt
Becoming trapped in a cycle of debt is one of the biggest issues facing small businesses in the modern age, as this gradually begins to eat into your margins and undermine your growth potential.
Despite this, startups still need to finance their launch and early-stage growth, so small businesses must strike the delicate balance between borrowing capital and maintaining control of their financial destiny.
A potential solution lies in the form of short-term financing options — such as invoice financing. Available through service providers such as Touch Financial, this enables you to sell your accounts receivable and optimise your levels of working capital by negating 30, 60 and 90-day invoicing terms.
This also allows you to retain control of your businesses equity and avoid long-term debt, so its a genuinely viable option in the modern age.
Reduce non-strategic costs
When managing your business, you can usually split costs into two distinct sections. These are strategic and non-strategic costs, with the former relating to business disciplines that have a direct impact on your company’s bottom line (such as marketing and sales).
In contrast, the latter are usually operational costs that do not have a direct bearing on your businesses profitability. Including logistics and labour, these costs offer tremendous opportunities for you to reduce your firm’s annual spend without impacting on the quality of your products or services.
So, by categorising and prioritising your businesses costs, you can get the most from your budget and achieve a viable return on investment.
Delegate the management of your finances to experts
Not all entrepreneurs are created equal, and your skill-set may be focused on creative business elements rather than practical alternatives such as finance.
In this case, you need to recognise any potential weaknesses and gaps in knowledge when launching your startup, by delegating the management of company finances to trusted and reputable experts.
Whether you in-source or outsource this is entirely up to you, but the key is to identify accredited partners who can add tangible value to your business.
Without this, you’ll struggle to manage your business finances, while also losing sight of the bigger picture and your overarching goals.
Featured image: FirmBee via Pixabay