Many business owners are no strangers to cash flow problems. It’s sometimes difficult to stay on top of expenses. You may even find yourself in debt. According to Fundera Ledger, only one-third of new small businesses will survive for ten years. The longer a company has been in business, the likelier it is to remain in business.
If you’re experiencing financial woes, don’t fret too much. There is still a way you can keep your expenses under control and prevent your debt from getting worse: by prioritizing everything. Here are some tactics for doing just that.
Prioritize by department
Even if you have a small business, you may still benefit from splitting the budget into multiple categories. Make a list of all of your departments and come up with an ideal budget plan for each. You might want to start with your employees, since they are your most valuable asset. Other important areas include advertising, product development, IT services, internet marketing, and so forth.
Create realistic projections for cash flow
The budgeting efforts of many small businesses revolve around cash flow projections rather than actual cash flow. It’s essential that you are as realistic as possible with this number. If you overestimate it, you will end up getting stuck with false hope and a large mess.
Know how to distinguish between essential and non-essential expenses
Essential expenses are considered to be anything involving payroll, rent, taxes, utilities, SOME supplies, and mortgage payments. Non-essential expenses include any service, item or bill that your business can survive without – at least for a little while.
If you absolutely must purchase office equipment, look for deals on used printers, fax machines, PCs, and any other electronic you need. There’s no rule that says they have to be brand new. Refurbished or slightly used electronics work just as well.
Save some of your profits
In fact, it might be a good idea not to spend all of your profits. Reserve some of it so that you will not wind up in further debt should an unexpected loss or problem occur. Reserving some profits in a dedicated savings account is one of the wisest things any business owner can do. Score.org has an interesting article regarding how much cash small businesses should keep in reserve.
Reanalyze the budget
If the debt keeps piling up, chances are that the current budget is not working out. It’s time to figure out why. Create a new budget based on the organization’s current financial situation. Make sure that the revenues can more than cover fixed monthly costs like the aforementioned essentials.
Allot a portion of the budget for various costs, like research, manufacturing materials, and office equipment. If you can’t afford expensive equipment, look into leasing options. If you need a commercial printing workstation, for instance, consider leasing a used HP Indigo or similar machine.
Prioritize your debts
Debt.org explains that “certain obligatiaons are more important to address than others”. There are always potential negative consequences for every debt you ignore, but some debts carry heavier consequences than others. If you don’t already have a financial advisor, it may be time to get one. Always pay what you owe to the IRS as well as secured loans and credit cards first.
You can regain control over your expenses if you prioritize them properly, create a new budget and consult with a reliable financial advisor ASAP.