How To Improve Your Business’s Financial Position

by | Aug 13, 2021 | Accounting, Business Advice, Finance

The primary goals of any business owner are for the business to thrive, be continuously income-generating, and to continuously be in a stable financial position for the life of the business.

As with any other opportunities, businesses do not become financially stable overnight. The financial stability of a business depends on several factors, and it entails a lot of hard work for the business owner and his team to achieve that. At any given time, there may be circumstances that will put the business in a position where its financial stability may be challenged. So how does a business owner put into place measures that would help improve financial position over time?

1. Seek advice from your business advisors

Not all businesses have official business advisors. Having them on board on a monthly retention fee can be costly to the company so they are usually on an as-needed basis. The expertise and knowledge of the business advisor is essential in making sure that everything is covered when it comes to business operations including its financial position.

The company’s accountant and the whole finance department of your business are key players in ensuring that the business is always in a good financial standing. They work hard to plan, strategize, and implement all financial policies and procedures that are in place in order to ensure a steady and, at the very least, normal cash flow in the business’s day-to-day operations. Their recommendations are almost always for the benefit of the business which the business owner should not disregard at all. It is all right to seek a second opinion from a certified business advisor so that the business owner may come to terms as to how the financial position of the company could be further improved over time. The business advisor should also follow through with his recommendations to the business owner in order to achieve the business’s improved financial position.

2. Have a clear and solid business plan

business idea and plan concept to improve financial position
A business plan is like a roadmap to success. As a business owner, it’s an important tool to help guide your decisions.

Anyone who ventures into a business should have a clear and solid business plan for all aspects of the business. These plans should be strategic and realistic at the same time. Business owners all aim for a generous stream of income at the end of the day. However, a business owner should always take into consideration certain challenges and interruptions that may happen along the way. Forecasting is also very important when conscientiously planning out the business needs in the future, especially in terms of its financial operations, simply because the trends or activities from previous accounting periods can dictate how the business will do financially in the future.

Your business plan is your operations manual. The business plan should also include your contingency plans and measures just in case one thing earlier planned does not work out for the business. A business owner should always be prepared for anything that may come along especially if it would concern the financial position of the business. The business owner should always aim for a stable financial position or better yet, have an improved financial position for the benefit of everyone involved in the business.

3. Consolidate and clear outstanding debt

Businesses avail of business loans to cover for immediate cash flow interruptions or to infuse additional funding for a possible purchase of new equipment or to make the business more liquid in terms of cash reserves. Whatever the reason there is for the business to take out loans, it is important that the business does not operate and survive mainly from taking out business loans because eventually, interest charges would eat up everything that the business is earning through its regular operations.

For what it is worth, talking to your business advisor about consolidating your business loans would be a good way of knowing whether to click the bait or not when it comes to consolidation. It may seem to be the best option to consolidate your loans especially if the business has multiple outstanding loans under his name. However, there are still instances that this may not be exactly the solution that you are looking for. Your business advisor will be able to help you look and study the data you have at hand so you can decide whether consolidation would be good or bad for your business. If the business decides on having the loans consolidated, a lot of trusted creditors or lending institutions may be able to help so that the business will be clean of loans and that cash flow would be much better in the long run.

4. Sell unwanted or unused assets

hand of a businessman selecting which assets to sell
Selling unused assets will help the business get a better cash flow on a more permanent basis and improve financial position in the long run.

A business is usually almost always complete in terms of fixed assets when it starts to operate. In the regular course of business operations, there would always come a time when a machine or piece of equipment becomes obsolete or becomes unusable due to changes in the processes involved. Unwanted or unused assets can always be converted to cash by simply selling them and the proceeds will go back to the business’s cash reserves as part of the capital or even a revolving fund for the business. Whichever way you choose to allocate or assign the proceeds of the sale on your accounting books, this will help the business get a better cash flow on a more permanent basis and improve financial position in the long run.

5. Rearrange or reduce business expenses

The importance of being prudent in terms of business expenses can never be ignored by any business owner. The business may start out with a set of expenses that are to be regularly paid and there may be ones already on the list but would have to be reduced or removed as the business operations progress. It is very important for the business owner and its finance team to be able to identify expenses that are essential to the business and remove those that are only supplemental or eventually just a waste of the business’s funds in the long run. Switching to other providers who can provide better deals and discounts on your business insurance policy may help reduce an essential business expense, but the business is benefiting more from it at a lesser cost to the company. You may also want to consider a periodic payment plan for bigger expenses rather than paying it at just one time. All of these should be carefully assessed and planned accordingly. Lesser essential expenses coupled with a good collection of invoices and other receivables plus well-managed and controlled business overhead expenses would surely help the business improve its financial position.

6. Stay on top of your invoices and collection

What better way to keep a good inflow of cash to the business is to ensure that you stay on top of all your business’s receivables – which include your invoices and other collectibles. This simply means that your accounts receivables are regularly monitored and there is an efficient and effective collection process in place to always collect invoices on time all the time. It is important to note that to improve financial position, a steady cash inflow is needed so that your cash flow statements would not yield into the negative at any time. The business may offer prompt payment discounts and other applicable trade discounts in order to encourage customers to pay their invoices on time. Although discounts may seem to reduce income on the part of the business, it does not necessarily mean so. Providing discounts both help the business and its customers in a positive way when it comes to their respective cash flow statements.

7. Provide multiple payment options to your customers

Customer paying using contactless payment option in a cafe
Cashless payments means more freedom for customers to pay in the ways they find most comfortable.

In this day and age of cashless and no-contact payments, it is essential for the business to begin offering multiple payment options to its customers for more flexibility and to encourage on-time payments from them. The use of PayPal, BPay, Zip, debit cards, and credit cards enables businesses to set up auto-debit payments from customers, decreasing the risk of late payments or even non-payment of outstanding invoices. Always remember that an efficient collection process of outstanding invoices helps keep your cash flow positive which in turn can help a lot to improve your business’s financial position.

8. Use new marketing techniques

Digital marketing is now the thing and is the future of businesses. As social media platforms have flourished and its services have improved over time for businesses, the business sector has found much better and more economical ways of getting the word out there to its customers and prospective clients. Digital marketing is relatively cheaper than traditional marketing techniques but is now highly considered to be more efficient and helpful in promoting businesses and services. Improving your marketing strategies via new marketing techniques help reduce advertising costs to the business while yielding better results in terms of gaining new customers and spreading the word about your business. Lesser marketing cost that comes with a potentially great influx of income from new customers can help your business have an improved financial position.

 9. Digitize your business

Small business owners may not see the need to invest in customer relations management software or even on an accounting software to help run and maintain accurate records or to automate certain repetitive tasks that take away so much productivity from your employees.  Digitizing your business may seem expensive so that is where a cost-benefit analysis would come in to make sure that the benefits of investing in an accounting software would outweigh its disadvantages. Accounting records need to be accurate one hundred percent of the time. Although data would still be coming from the staff, accounting software can readily identify errors and it would be easier to find these errors rather than rummaging through so many paper and printed records which takes a lot of time away from your employees’ productivity.

When it comes to repetitive tasks, there are now artificial intelligence-powered software that help automate the customer service functions of small and large-scale businesses alike. Most social media platforms integrate free AI-powered applications that help reduce the time spent on answering repetitive questions or providing information that is regularly being asked about the business. Lesser marketing or customer service cost yet it can make your employees more productive and less stressed. The results to an improved financial position may not be immediate but can be seen through the cash flow statement in the long run.

The use of cloud-based software provides lesser costs for businesses and would still give better benefit to the business with its use. With an online file management that is centralized, this helps reduce the cost of office supplies all year round. Storage of information is also maximized, even to the extent of a lifetime, and information about anything, especially financial records, are easily and readily accessible – with the right controls and access to authorized personnel. The savings from these reduced costs help improve financial position with a better cash flow for the business operations making the investment on digitizing your business all worth it.

10. Monitor your cash flow and day-to-day expenses

As we have been talking about cash flow statements and expenditures, monitoring your cash flow and day-to-day expenses should always be done by the business owner and the management team. It is through this that management will be able to pinpoint what needs to be adjusted in terms of expenses, what causes overhead expenses to shoot up in the course of regular operations, how is the collection process going, and other similar circumstances. Regularly monitoring the cash inflow and outflow helps in planning out changes that are essential in making sure that the business will not be short of cash and its reserves which results in having the confidence that the financial position of the business is not compromised in any way.

Having the right financial controls, especially when it comes to expenditures, help monitor irregularities in the business’s cash inflows and outflows. These financial controls extend not only to actual cash on hand or its cash reserves, but also to how the finances and assets are put in place. Misplaced or mishandled funding or assets yields a huge effect in the cash flow which can put the business in a tight position. It is essential that the business owner and the management team are aware of how these controls are used to monitor financial activities and to ensure that these controls will help bring about an improved financial position for the business.

11. Meeting tax deadlines

Word TAX and Calculator on Wooden Table
A business without tax deficits leaves a good credit rating on your business profile.

Taxes are the lifeblood of the government and the taxes that are paid to the government are used to provide everyone the benefits that the government has to offer. A business needs to make sure that it always pays its taxes on time as well. A business without tax deficits leaves a good credit rating on your business profile making it a more trustworthy entity in the eyes of your creditors, vendors, suppliers, customers, and your employees. Loyalty to the business is maintained or even improved which in turn would mean a steady flow of income on a regular basis. Taxes may seem to be a burden because of the regular costs it takes out from the company budget. But over time, its benefits still outweigh the costs. 

12. Level up your financial competencies

This statement speaks to the bosses of the business – the business owner, management team, investors, stakeholders, and to the people who are considered important in the course of the business operations. Not all business owners are equipped with an all-around financial know-how that is why they have an accountant and a finance team to deal with financial operations. However, it is vital for these people involved in the decision-making processes of the business to have the financial knowledge used to make sound financial decisions for the benefit of the company.

two business owners smiling at each other while checking on how to improve financial position in the laptop
Monitoring cash flow should always be done by the business owner and the management team.

Aside from learning the basics of financial management, it is also important that business owners fully understand the interconnected processes of the accounting cycle and be able to at least analyze and interpret the results of these financial activities and how they affect the balances of the business’s accounting records and books. It may really seem complicated at first, but the analysis of any financial data presented may be simplified if the business owner and the management team know the basics.

Attending seminars and courses that could make a business owner more adept and knowledgeable in handling financial data and other financial competencies needed in running a business, does not only improve his personal credentials and know-how. When a business owner knows and can easily translate raw financial data for other members of the team to fully understand its meaning and impact to the business, better planning and forecasting can be done to rectify errors in the cash outflow or to further improve cash inflow for the business if it is already flourishing. The business owner can definitely use an “upgrade” of financial know-how in order to properly strategize and steer the business into achieving an improved financial position in the future.



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