How to Attain Financial Stability in Your Business
Frankly, financial stability is what every businessman desires. The growth of any business is greatly determined by finance. This means that the business has customers and each month it achieves a certain amount of sales that enables it to survive. Without customers a business will not achieve financial stability, it cannot pay its expenses.
You should always pay yourself first from the profits your business earns. Differentiate the money that belongs to the business from your personal money. It is advisable to have a separate account; your personal account should be different from business account.
I was really thinking and I concluded that no business can do without finance. Finance is the lifeblood of any business. Funds are required for various purposes like buying stock, paying employees etc. Let me define what finance is before we go into details and here I quote Wheeler,
Business finance is defined as that business activity which is concerned with the acquisition and conservation of capital funds in meeting the financial needs and overall objectives of business enterprise.
From this definition, securing of funds is not the only objective of a business enterprise but it also includes the best utilization of funds. No wastage of capital funds. If you want the funds secured to be utilized in the best possible manner in your business, then you should practice some of the ways that have led some businesses to attain financial stability.
Five Important Tips Towards Financial Stability
1.) Budget: Have a detailed budget on how you’re going to spend the funds. You’ll always make money and spend it. You’ll manage finances effectively if only you have approximated the amount required and listed all the expenditure items. A budget creates a clear picture on how much money your business has and the amount of money required to fund the deficit if at all it is there. Avoid guesswork by budgeting always.
2.) Expenses: If there are unnecessary costs in your business, the best thing to do is to trim them. You only come to note these costs after you have analyzed your budget. Do away with unnecessary expenditures for your business to be stable financially.
3.) Free from Debts: Some people say that there is no business operating without debts. Yes, I don’t disagree with this but too many debts may make your business to become insolvent. Before you finance your business through borrowed money, it is better to be sure that the profit you’re currently earning is sufficient enough to pay the loan and in additional leaving you with sufficient amount of money to pay yourself first. Don’t just borrow money blindly; there should be a viable project to finance. Never allow your business to accumulate debts. Always pay your bills and your creditors at the beginning of every month.
4.) Saving: At the end of the fiscal year, you should save part of the profits earned. The savings will assists you to expand your business and also for taking care of uncertainty risks. Ploughing back of profits is the less painful way of financing your business compared to bank loans that charge high interest rates.
5.) Diversifying: Don’t let your business to have only one of way of generating income. Instead, diversify your business by investing profits earned in viable projects. This ensures financial stability for your business throughout. If one of your projects is running at a loss, then the rest of the projects will sustain it. First, do research to ascertain the viability of the projects before investing on them so that you don’t end up losing funds.