Money makes the world go round, but it also makes your business peak and trough. The impact of increasing your productivity, hiring hard-working staff, and choosing the right product is all about your ability to handle cash flow properly. Unfortunately, so many startups have the ideas, but not necessarily the money to back it up. And while many wide-eyed enthusiasts will hammer forth the prospect that the product is all and the image will carry it through, every business faces particular money problems. So what are the problems, and how can we solve them?
A Lack Of Cash Flow
If you have modest cash flow, you’re going to struggle to expand your business. Common cash flow problems result as a lack of money coming in, and one of the main cash flow culprits in startups is the client not paying up. Invoice factoring is one of these solutions to help navigate this for many companies, and there are suppliers like Invoice Financing Australia that can help with this. If you are looking to restructure your company further down the line, you can get business loans to help, but if your cash flow is modest, this will transform into debt.
Not Understanding The Debt To Equity Ratio
The debt to equity ratio shows you how much debt you have in comparison to the physical cash in your vault. It varies depending on the industry, but the goal is to look for a smaller debt to equity ratio. Learning how to calculate this as soon as possible will give you the best understanding of how to tackle these issues going forward.
Poor Financial Management
Sometimes it’s as simple as this. You might not have the tools at your disposal to keep track of your accounts receivable and accounts payable. If you don’t have a business plan, something that many startups don’t have, the chances are that you haven’t created a financial projection, and so, the business will begin to unravel soon enough! In addition to this, you need to undertake research into your market, and understand how to meet your revenue goals, and undertake a holistic assessment of the viability of the business. If you’re looking into approach money lenders in the future, you need to have the information thoroughly researched to back up your claim that you can keep afloat.
Namely too much of it. Using credit cards with high-interest rates, as well as having large monthly repayments on a business loan is going to have a detrimental effect on your monthly expenses. As a result, your outgoings are going to be higher and higher the more and more you dig yourself into debt. This is a bad reputation in the eyes of the banks, and the further you dig yourself into debt, you might find the only option out is to declare insolvency or bankruptcy. While bankruptcy isn’t always a bad thing, it can be a very stressful process, and it can weigh heavy on you personally.
Many problems will never go away, and when the issues arise, as they do, it’s always important to know your options as well as the solutions to any given problem. Problem-solving is a vital component of implementing your business, but this is doubly so when it comes to the thorny issue of finances.
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