The cash in your business is perhaps one of the most important factors defining your success. Small and big businesses alike need cash for optimizing their resources and for ensuring that they are well equipped to handle all responsibilities that arise during the day to day operations of their business.
When starting your new business, you might have all of the major expenses for the time to come streamlined. All entrepreneurs think that the cash they have invested in their business during the start of operations will fund their processes and will also help them maintain a positive cash balance for the first few months. And, then there is the thought of the business financing it as well, eventually, so you don’t think much about the predicament of depleting cash reserves.
However, you need to be prepared for emergencies that can come during normal business operations. Vehicles under your ownership might need sudden repairs, equipment might break and the personnel you have in your team might leave, prompting you to hire someone else while incurring the training expenses again.
All of these sudden expenses can derail your processes and cash flow, leading to a cash crunch of sorts. Knowing just how brutal a cash crunch can be for a business that has just started, we believe that the best way out of this mess is to follow the tips that we mention below. These tips will help you in maintaining adequate cash reserves in the long run.
There are two kinds of budgets; one that you make before starting your business and the second that you make once you’ve started your business. The budgets you make before you have started your business are based more on optimism and estimates, than experience. The budgets you make once you have spent some time in the business are based on experience and would guide you in a better manner.
Hence, once you start in business, you should track every expense you incur. All recorded expenses for a quarter or 6 months should be totaled, and you should have a figure for what it took you to handle operations during that period.
Now, you can use these figures to make budgets for the time to come. The budget you make for the quarter that is to come would hence be more balanced and based on experience. You cannot let your optimism blow you over now.
Additionally, if you are planning to go for growth over the coming quarter, then you can adjust the growing operations as part of your budget. The budget, if it is comprehensive, can allow you to keep a track on your expenses and remain on the positive side of the cash flow at all times.
Have an Emergency Fund
An emergency fund is perhaps the best thing you can do for your business. We understand that you might not have the reserves to start an emergency fund from scratch, but we won’t recommend you to neglect one.
Rather than investing a hefty sum during the early stages of your business, we would want you to put a specific percentage of your monthly income into an emergency fund. This way, if you keep depositing a fixed percentage of your revenues into the fund, you will start noticing that the deposits keep increasing with time.
Know Your Needs
It is always good to know the operations you should focus on and the parts of your business that should be kept functional at all times. As an entrepreneur, you can’t afford to make poor decisions for your business. If you do encounter a period of cash crunch, it is best to know the departments of your business that you can halt for the time being. The core processes should be made to continue without a delay because a delay in these processes will halt the production capabilities of your business.
In short, know processes that you can maybe stop for a while in the situation of a cash crunch. Additionally, also know the kind of loan options you should go for when you face a negative cash flow like situation. Do you go to the bank? How bad is your credit score? What are your options? Have answers to these questions at the ready at all times, because you don’t want to ameliorate a cash crunch by taking more time to list down your possible options.
Merchant Cash Advance
Continuing from the point above, how do you inject life into your cash flow when it does seem to be falling? Our best bet would be to go for a Merchant Cash Advance. Merchant cash advances help provide you a quick funding option that you can use to inject some much-needed life into your business. We recommend this option because it has a high approval rate and doesn’t require a stringent check on your credit history. Additionally, the repayment plan is extremely convenient and has options that an everyday business owner can bear. In most cases, you can pay back the loan on your merchant cash advance through a fixed percentage of the sales that you are making in the future. Your lending agency will get in a deal with you, where rather than paying strict payments every month, you can pay back the loaned amount through fixed percentages of your credit card sales. This way you can avoid the liquidity crunch that can strike you at the time of repayment.
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This post was written by firstdownadmin