Your business is still new. It has been operating for only two years, but you’re very happy with the progress you’re experiencing. You contribute the success of your business to all the precautions you’ve done in the past. You’ve been very careful about who you hire, what processes you implement in the business and who should you work with as your suppliers. Sure, you might have been very keen on all of those things, but have you ever considered the possibility of your business heading towards bankruptcy? Your business is still new, and this makes it very susceptible to bankruptcy, and of course, you would never want that to happen to your business. Along with the precautions you’re doing right now, the tips presented below will also help reduce your risk of bankruptcy in business:
- You should prioritize debt repayments: If you’re a sole proprietor, you must have acquired debts to start up the business. This usually comes in large amounts, which makes it difficult for you to pay one time to all of your creditors. But since your business is now operating, you should prioritize paying these debts. You can start paying secured creditors and pay those with the highest interest rates first. With your unsecured creditors and vendors, it’s best that you treat them all equally and pay them all something. You should not play favorites with your creditors. But if you still have problems with your debt payments after doing all of these, you should talk with your creditors and ask for possible repayment terms.
- You should always maintain an updated business plan: Before you started your business, you should have a business plan. This document is vital to ensure that you know where your business is going and how you could possibly achieve that goal. Your business plan should also include everything about your financial decisions and the business’ cash flow, capital-expense budget and other business expenses. It will also aid in executive decisions to keep expenses and revenues in equilibrium.
- You should be accurate and proactive in reviewing financial results: You might have hired employees to help you run your business, but you shouldn’t solely rely on them when it comes to financial decisions. You should take the time to review all of your business’ financial reports and journal entries so whenever you can notice something is off, you can immediately take measures to prevent it from worsening. Time is always crucial for any business.
- You should budget for all expenses: Similar as to how you handle your personal expenses, your business expenses should also be budgeted. You should put funds for your quarterly, seasonal and annual expenses as well as additional funds for more unexpected expenses. Doing this will help you ensure that you’ll not be caught up in the expenses of your business and you know where your business’ expenses are actually going. If you haven’t done this in the past, you can start by writing down all of your possible infrequent expenses and make them part of your regular budget. You should be very conservative with your profit margin. You should also make sure that you have a “cash cushion” for your business.
- You should consider purchasing accounting software applications: Almost all of the business processes can be done using an application and you should consider purchasing one for your accounting processes. Once things are done using an application, there’ll be less human intervention, which can mean less mistakes in the long run. This can work wonders for you, especially if your business is very young. You’ll not only ensure that your finances are on track but you can also generate accurate reports from these applications. Using these reports, you’d know which to improve in your business.
- You should hire a consultant: Since this is your first time to handle a responsibility this big, chances are you don’t have in-depth knowledge of the ins and outs of the business especially when it comes to the finances. If you want to be sure of every decision that you make, hiring a consultant for your business might work out well for you. They’re the best people to ask for help because they have years of experience on the things that you’re doing now. Once you have a consultant working for your business, you’d be able to focus on your business operations while ensuring that you’ll not head towards bankruptcy.
Your business is basically like your child. You’ve exerted your time and effort into it, and that’s why you want your business to grow and operate for the longest time possible. You don’t want everything to go down the drain, and being careful of your financial decisions to stay away from bankruptcy is one way of ensuring your business’ long-term success. These precautions might be new or tedious on your part, but as a business owner you’ll be able to realize that all of these will be worth it in the end. You don’t want your business to head to bankruptcy, right?
This website will provide you more information on how your business can stray away from bankruptcy.
Gail Wilson has more than 12 years of experience under her belt when it comes to business, which she is currently sharing with her clients and peers as part of the law industry. She writes pieces on various law topics that she hopes could help the common reader with their concerns. A family oriented, Gail loves spending time with her husband and two sons during her free time.