Proper financial management is one of the pillars of any business’s success, regardless of its size, type, or home industry. In addition, no matter how profitable a business may be, it can still fail to grow and thrive if its finances are poorly managed.
If you’re a small- or medium-sized enterprise (SME) owner, then financial management is all the more important given that your resources are much more modest compared to those of large corporations. And planning only for your business’s immediate finances isn’t enough. On top of keeping track of your daily profits and expenses, the onus is on you to start future-proofing your business finances as early on as possible so that it has a better chance of withstanding any major financial hurdles that will come its way.
For the beginner entrepreneur, here are some practical tips for future-proofing your business’s finances today:
1) Review Your Financial History
Metrics of your cash flow—from your expenses to your revenue—can say a lot about your business’s financial standing at the present, as well as accurately predict how it may do in the future. You should learn how to review the basic facts behind your business’s financial history as well as how to do forecasts. Both will allow you to improve your decision-making for your business so that its leadership doesn’t stumble easily when faced with financial issues.
Learn to monitor your expenses to see if they’re sustained by your revenue or if you need to cut costs, and analyze patterns in your sales performance to see what you can take advantage of to improve your revenue. This is the kind of knowledge you’ll always have to exercise in order to position your business towards a more secure future.
2) Invest in New Technology
Technology will always be a key factor when it comes to successfully future-proofing a business. Even if you’re managing a smaller business and think you’re already doing fine as is, you should be looking forward and preparing your business for when it expands. Otherwise, you’ll be stuck where you are and unable to meet your growing customer base’s needs.
If you’re based in the country and your business lacks extra capital to invest in new technology, then you can look into business loan Philippines offers that match your needs. A program like Maya’s Flexi Loan, for example, will help you obtain up to PHP 2 million in additional funding for your business that you can use to upgrade your current equipment, hire more staff, or even build a new branch.
3) Conduct Regular Customer Surveys
The longevity of your business relies heavily on the patronage of your customers. Knowing that, it’s crucial to always be informed about the evolving needs of your customer base so that your products and services remain relevant to them in the future.
Make the effort to conduct regular customer surveys or do market research. Look into how your competitors are doing as well, and see what you can learn from them to improve your own business.
4) Brainstorm Ways to Diversify Your Revenue Stream
To mitigate financial risks that may come for your business in the future, consider diversifying your current revenue stream. Revisit your business’s main revenue stream and brainstorm for ways on how to expand it. For instance, think of complementary products or services you can provide alongside your main offerings.
You can also try out a subscription model, especially if your business sells a product or service that people regularly need. This recurring revenue can greatly help to keep your business finances stable in the long run.
5) Stay on Top of Your Debts
Debts aren’t necessarily a bad thing so long as the funding obtained from them is being used wisely and so long as you’re able to stay on top of your repayment schedule. However, it’s when you take on too much debt or miss payments that you end up crippling your business’s finances well into the future. You’ll definitely want to make it a part of your future-proofing strategy to stay on top of your debts so that your business can enjoy more financial freedom.
6) Create an Emergency Fund for Your Business
Even with proper planning and thorough forecasting, your business isn’t immune to financial emergencies. To make sure those emergencies won’t drain your resources, you’ll want to create an emergency fund that can soften the blow of any financial issue your business may encounter in the future.
Aim to have at least six months’ expenses worth of emergency funding tucked away. This may seem like a tall order, especially for small businesses, but you can always go slow, yet steady by regularly setting aside some earnings for the emergency fund until you reach your goal.
In the end, future-proofing your business is an issue of doing not just one thing, but pooling multiple efforts into its resilience and self-sufficiency. In addition to finding ways to increase your revenues, you’ll also want to be conscientious about managing your current cash flow and ensuring you’ve got enough to tide you through any financial emergencies. Let this article be a guide for how to start the difficult process of future-proofing, and aim to stay several steps ahead of the present.
