Strengthening Your Business Finances: 3 Essentials
Using business funds efficiently is key to success for any business, but especially for smaller companies, which usually have less of a financial cushion to fall back on if needed. To support your business’s performance, you’ll need to take a high-level view of your financial activity – including all revenue streams, operating expenses, and cash reserves.
By examining how each of these factors contributes to your overall financial picture, you’ll be in a better position to grow your revenue, streamline your operations, and advance your long-term strategy.
Carefully review your revenue, operating costs, budget, and projections to identify ways to improve your business financials and long-term performance. You can support a healthy balance sheet and strong growth trajectory by making practical improvements in these three areas.
It’s essential to understand how much income you need to stay afloat, how much more you need to grow, and how you can enhance or add to your current revenue stream.
Perform a break-even analysis to get a better picture of your business’s profitability, then review your revenue drivers to see where you can make improvements – such as by shifting sales priorities, adding or discontinuing products or service lines, entering new markets, or adjusting prices. If your strategy to boost revenue comes with an upfront cost, it may be time to explore financing options to help you pursue your growth objectives while protecting your cash flow.
Even if your business is unable to increase revenue in the short term, you can still improve your profitability by trimming labor and production costs. Because a business’s largest recurring expenses are usually staff-related – such as salaries, payroll taxes, and benefits – the best starting point when looking for new cost efficiencies is to review the productivity of your personnel.
Consider increasing training to make your staff more versatile, or improving existing workflows. Sometimes, spending money on facility upgrades or new technology can lead to process improvements that give you a good return on investment.
Look at your budget and monthly expenses to see where your funds are going, then think about how each area contributes to your bottom line, either directly or indirectly.
If the costs associated with your facilities, equipment, marketing efforts, vendor relationships, vehicle fleet, or other budget items are disproportionately high, look for ways to get more value out of this expense or find ways to scale back, such as by selling underused company assets or switching to vendors or services that offer greater value.
Financial Health Should Be a Year-Round Focus
Obviously, managing your business efficiently and eliminating wasteful spending is critical when times are lean, but it should remain a priority during periods of prosperity as well. Make sure your excess capital is put to the best use – such as through short- or long-term investments, careful planning of capital expenditures, or professional development for your staff.
By paying close attention to these three essentials, you can help ensure your business’s long-term financial health, increase stakeholder support, and help improve the performance and professional growth of your employees.
We’re ready to provide the right financial solutions to help your business work smarter, with flexible business banking options, sophisticated online banking tools, and competitive financing – all backed by a knowledgeable team that’s right in your community.
This information is for general informational purposes only and does not constitute tax, legal, or business advice. Business loans are subject to credit review and approval.