Running a company presents many challenges before the CEO. From managing employees to resolving unexpected issues, the company will keep you on your toes. However, financial challenges present the ones that CEOs afraid the most and can also be a painful experience for everyone.
You simply can’t predict everything, but you can be prepared to face any problem with a solution or mitigation of the consequences. Competitive market asks for pre-emptive measures in order to avoid unexpected events. Therefore, here are some financial challenges and ways to deal with them properly.
1. Lack of working capital
If you do organise your finances so that you don’t have any surplus funds at your disposal then you will be in a lot of trouble when the dry period arrives. You can negotiate a deal with your bank and get the funds to deal with salaries and some overdue expenses, but that is not a permanent solution.
The best way to behave is to have at least enough working capital to cover 6 months of expenses which are enough time to find new clients and customers. Also, cut your costs as much as possible and at least 20% to create more working capital. Always pay attention that you have working capital available, especially if you are a start-up, since that may decide if you survive.
2. Inconsistent cash flow
One reason why you may have an inconsistent cash flow is that your business is based on projects. If this is the case, then you have to create a good strategy to always have projects lined up for you. This means that you will have to think ahead, but also be able to deliver what you promised and within deadlines to avoid penalties.
If you are a non-project business, then focus on your recurring clients and customers. Make sure that they not only pay on time but also come back for more. You can do this by offering special incentives and renegotiating payment terms that will benefit you both.
3. You don’t pay your debts on time
If you’re being late with your debt payments, then maybe it’s time to look for insolvency solutions Australia, USA, EU and other countries offer to companies. There are Pre-pack administration services that can help business owners who are planning to sell their business due to financial troubles. It’s very important to find out where is the problem and deal with it swiftly and efficiently. Start with checking out the late payments by your clients and suppliers first, and see that they make the payments as soon as possible.
Also, talk to your banker and try to find the best solution to pay off the instalments and maybe even take a loan to deal with your debt. Create a monthly budget and calculate all expenses into it, then respect the established amount of funds and don’t neglect your obligations to creditors.
4. Inappropriate book-keeping
Book-keeping is nothing glamorous, but nonetheless, you have to pay close attention that all your accounts are in order or the consequences can be severe. Start by hiring a professional or a company that will handle your books. This will cost you, but it’s cheaper than going into trouble for unpaid taxes and inappropriate book-keeping.
The laws and regulations on taxes can require an expert help, especially if you are a big company and have a large cash flow or work on the international level. However, if you are a start-up or small, your administrative assistant may be able to deal with this. Just don’t underestimate the seriousness of this part of the business, since penalties are harsh.
5. You are surprised by your expenses
The only way a company can be surprised by expenses is if it didn’t have a sound financial plan and prediction of the future costs. Revenues can’t be predicted with precision, but only estimated. However, expenses are something you deal with every month and you have to know the exact amount to set aside.
You will encounter unforeseen expenses, of course, and that is another reason why you should have funds set aside for them. But if you control yourself and not make any impulsive choices, you will be able to respect the budget and stay solvent.
In the end
The principle with finances in business is the same as in anything else, or at least similar. You have to plan ahead for certain expenses and be ready for those unexpected ones. The best strategy is to have a budget in place for the next six month. That way you can cover your basics and avoid financial challenges that can cost you your business. You can also look for legal assistance with a low-cost liquidation process to assist you in this challenging time.
