If you want to grow your business, then you should have a viable finance strategy in place. Doing business doesn’t only involve making sales, but also tracking your expenses and managing other aspects such as cash flow. A focus on high sales should be accompanied by a keen awareness of your outflows as well.
That’s why having sound financial strategies can enable your business to grow. Consider some of the following tactics to handle your finances well:
1. Balance Business Finance With Overall Goals
The first initiative you need to take is ensure that your business finance goals are clear and aligned with the mission of your company. You should list down every short and long-term goal you have. Then, devise your financial goals in a way that makes them attainable. Thus, you should lay down smaller steps or goals for every large or long-term goal. You should specifically know how to do this by enumerating the necessary steps you need to take. Then, include well-designed strategies to help you achieve those steps.
Although growing your finances is one of your business goals, you shouldn’t become so focused on it that you end up forgetting the real purpose of your business. At times, that leads a number of businesses to resort to deceptive marketing just to enhance sales. In order to attain your financial goals, you also need to consider non-monetary goals like customer loyalty and skilled employees.
If customers keep on buying your products, then you’re increasing your sales. And if you value your employees’ growth, they’ll be loyal to your company as well, which can lessen turnover and expenses incurred for hiring new employees.
That being said, it is of crucial importance not to lose sight of your financial goals. Say you want to increase your business’ revenue, then you should set specific revenue goals to achieve that. Using feedback from your staff, industry research, marketplace analysis, and past performance, you can adjust your goals each quarter.
2. Tap Multiple Sources Of Financing
Another financial strategy to grow your business is to have multiple business financing channels. It means that you can mitigate risk by not having only one type of funding source.
So if you’re looking to balance ways of managing the sources of your business finances, take the following into consideration:
- Non-Bank Lenders – One way to get capital and meet business finance needs is through a non-bank lender like Scottish Pacific. These non-bank lenders can help you in relation to trade finance facilities, asset finance, invoice finance, and working capital. Moreover, most of them even provide financial advice from experienced decision makers, so that you can choose the best financial option for your business.
- Bank Loans – Although economic crises can affect the approval of loans by banks, they are still one of your options. Especially if your business has been doing well, and you’ve got a good credit history, then they might continue giving out loans. With such, you can use the money to buy more equipment or finance expansion fees.
- Find Investors – Looking for investors may seem difficult, but if your business plan is solid, more investors are likely to show interest in your proposition. But if you want someone to be hands-on with the business, find a partner whom you can share financial and operational burdens with.
3. Manage Liquidity
Another important strategy you should consider is managing your business’ liquidity. Keeping a close watch on your working capital is the lifeline of your business because if it falls short, it could lead you to bankruptcy. Also, liquidity is vital so that you can cover the short-term cash needs of your business.
You can measure your business’ liquidity via quick and current ratios. The quick ratio refers to the ability of your business to cover your short-term obligations. You can get the quick ratio by dividing the difference between existing assets and inventories by your current liabilities.
On the other hand, you can get the current ratio by dividing existing assets by current liabilities. The result is the measurement of how well your business can pay its current liabilities within a year. Here, you’re using inventories, accounts receivable, cash, and existing assets to pay off your business’ obligations.
Knowing the liquidity ratios of your business helps you to gauge the financial health of your business. You want to make sure that you have sufficient assets to enable you to meet your short-term obligations.
It’s essential to have high sales, but not having the right finance strategies could stunt the growth of your business. Don’t focus on high sales alone but start with reliable and balanced business financial goals. You should also opt for more than one means of financing.
That includes attracting more investors and securing loans through diversified channels. Lastly, you must manage your business liquidity so that you won’t risk going bankrupt. By keeping close tabs on your working capital and making arrangements to generate funding, you can make wise decisions to keep your business growing.