Businesses across the world are struggling as a result of the pandemic, and most of them are already in the red (operating at a loss). To keep their doors open, most business owners have to borrow money, and doing so in the current trying times can make it even more challenging to keep your business afloat.
At this time, you may need professional assistance before you think about how you can liquidate a company. Businesses that find themselves deep into the red often find it impossible to recover. Use the following tips to prevent your business from running into financial trouble.
Don’t Count Your Chicks before They Hatch
Regardless of how well you know your customers, always remember that receivables are not profits. For this reason, you cannot write checks just because you’re expecting some money. It’s not uncommon for clients to default on payments even after they have received goods and services. Therefore, to ensure that you get paid, try and get 20 to 50% of the payment upfront. Additionally, draft contracts that define deliverables and when your customers should pay you.
Get Insurance Coverage
Businesses face a myriad of risks, from liability suits to data breaches to property damage. Any threat may cause your business a significant amount, and to prevent this, you should ensure that your business is protected with the right commercial insurance.
Use your Business Credit Card Wisely
As a business owner, you should use profits to pay for bills. When it comes to credit, only use it if you absolutely need to. Using your credit card will cost your business more money than it would cost you to write checks.
If you need a little financial assistance once in a while, you can consider using your credit card. But if you have been experiencing financial problems for some time, you may want to avoid the easy way out. Instead, contact your vendors and the debtors you owe before you resolve to use your high-interest credit card.
Hire an Accountant
As a business owner, you obviously have some basic accounting skills. However, this skill may not be enough to help you maintain your business’s finances. Additionally, you will still have to handle other essential things in your business. Therefore, instead of stretching yourself and risking simple financial errors, you may want to consider hiring a designated accountant who will help you handle your business’s accounts. This way, you will get enough time to oversee other aspects of your business and spare some time to check over the finances.
Don’t Sacrifice Quality
Starting and running a business is expensive, and for you to keep your business afloat, you have to cut on business expenses and maximize profits. This means that you may have to make some cuts in your expenditure. However, don’t make the mistake of cutting into the quality of your products or services to maximize profit. It is possible to cut on some expenses without sacrificing quality.
To stop and prevent business interruptions, always plan in advance. Most businesses find themselves in the red because of making hasty decisions about receivables, not purchasing business insurance, failing to hire an accountant, using their credit poorly, and sacrificing quality.