How Businesses Can Run Smoothly Throughout the Year
It would be fair to say that most businesses go through peaks and troughs over the course of twelve months, and there are many reasons for this. It may be that the business sells a product or offers a service that’s mainly bought at one or two particular times of the year. Or it could be that the customers’ own spending patterns have an effect. But one thing is for certain – businesses who fail to plan for these variations will find that things don’t always run smoothly and in fact, it can be one of the biggest problems a business can face.
While an obvious area to address is ensuring that you have enough employees to cope with your busiest times (and not so many when business is quiet) a far more critical consideration is to make sure that you have a steady cash flow throughout the year. That’s because, even though your business may well be profitable, if the cash isn’t there to pay staff, suppliers and other expenses, then there’s a real possibility that the company could fail.
Even if this sounds scary, it needn’t be. That’s because it just takes some foresight and planning to even out cash flow to allow your business to run smoothly throughout the year.
This means that you’ll know when the bottlenecks are going to occur and ensure that you’ve got a strategy, and preferably some cash reserves, in place.
If you can use previous years’ trading patterns as a guide to when you’re going to experience these pinch points, you can usually predict them. But if your business has not been in operation long enough to do this, then logic can often come into play. For example if you sell skis, chances are that sales will be lower in the summer months and if you make sunglasses, demand is going to be highest at this time of year.
Once you’ve established when your quiet times will be, it could be worth looking into other ways to generate income to tide you over and this could even lead into a whole new area of profit for you.
Another key element of keeping on top of your cash flow is ensuring that your invoices are paid promptly. Most businesses do this by having strict payment terms, usually of 30 or 60 days, but it can also be a very good idea to offer clients incentives for early payment.
The flipside of this, of course, is to negotiate as long a period for payment as possible with your own suppliers and investing the money in an interest-earning account until it has to be paid out.
A great way to keep on top of what can be a very complicated operation is to also invest in some quality online accounting software. This won’t just automate your accounting processes, it will also be able to give you an up to date reports of where your company stands financially. Another area worth considering is to not just rely on the software to manage finances more smoothly but to introduce some human input too. A financial professional may well be able to identify other efficiencies you could make – so much so that they could even save you more than the salary you need to pay them.
The post How Businesses Can Run Smoothly Throughout the Year appeared first on Blogtrepreneur – For Busy Entrepreneurs.