Anyone undergoing financial distress in their business knows that it can be an all consuming agony which interferes with every aspect of your business and personal life. Sleep, family, and health issues can be a direct result of the stress stemming from worrying about the financial stability of your company and how you are going to cover the next payroll payment.
Cash flow problems is one of the major reasons about sixty percent of businesses flounder in the first three years of operation. If your business is struggling you will need both short term and long term solutions to enable you to weather the storm.
To give you a little breathing space to sort out your longer term restructuring, it may be wise to instigate immediate band aids such as:
- Short term business loans
- Bank reconciliation
- Bank overdraft or line of credit
- Set up accounts or organise favorable credit terms with suppliers
The broader picture
It is astounding that many SMEs are still struggling to run their businesses on outdated, inefficient, or unsuitable accounting software. Rectifying financial problems must begin by identifying areas of the business which are not performing to expectation.
This involves gaining a clear understanding of where and when money is being generated and also where, when and how it is flowing out. To put it simply, you can’t plug a leak if you don’t know where it is!
The value to a business of a highly functional, user-friendly accounting software system, cannot be understated. The system should be flexible enough to allow you to add functionality on an as needs basis so you’re paying for only what you need.
One of the most powerful accounting software tools is concise, detailed reporting capabilities. Valuable insights can be gained by implementing a simple yet comprehensive accounting package which gives you real time reporting, tracking and management of any or all of the following basic business components:
- Invoicing, bills and payments
- Streamlined access to business banking to enable automatic bank reconciliation
- Timesheets and expense payments
- Jobs and projects
- Payroll
Not only will clever accounting software simplify and clarify complex financial data, it can save substantial cost in man hours. Comprehensive financial reporting can also identify inefficiencies in your business processes, allowing you to hone and optimise them.
Communicating with creditors
Once you have identified strategies to stem business overheads and outgoings, it pays to make contact with your creditors. The majority of accounts receivable departments will have had experience with clients who have cash flow problems. It pays for them to work with you to ensure your business gets back on track so they can get paid.
This relationship building can have positive ramifications if you are able to honour your commitments. Have a sound business plan in place to enable you to repay outstanding debts in a mutually agreed time frame. A proactive approach can go along way to assuaging creditors and reducing stress on your staff.
Predicting and forecasting
Every business will experience ebbs and flows over the course of time. Having strategies in place which can predict the lean times and buffer for them, is crucial. It is astounding to think that many businesses fail even when they are running at a profit; simply because of poor cash flow.
Budgeting and forecasting may be farthest from your mind when a business is suffering immediate financial distress. However, once back on an even keel, the following business facets should be reviewed monthly or quarterly to enable you to short circuit problems before they occur:
- Ongoing overheads and business commitments
- Sales and income
- Business expenses including:
- Wages
- Advertising
- Insurances
- Vehicles
- Cash flow
Tax debts
If you owe a substantial debt to the ATO, it may be advisable to speak with a business recovery professional. Locate one who will provide an initial consultation at little to no cost so you can assess if they can be of value to you.
Explain your situation frankly and ask if it falls under their area of expertise. Research testimonials from past clients to gain insights into the effectiveness of their services. These agents often understand loopholes and strategies which can substantially reduce the amount owing to the tax department. It is certainly worth making contact to see what advice they provide.
The most important tip is–don’t wait and hope things will get better. If you are stressed out about your business finances, act now. Things rarely improve without change and being proactive can save you substantial anguish and distress, and get you back on the track of running a successful and financially viable business.
