Problems With Profit? Address These Issues!

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When it comes to business, the aim of the game is always to turn a profit. You might have escaped the rat race and set up your own venture for reasons other than money, but unless you’re making more than you spend then it simply won’t be a success. For this reason, when profits start to plummet and making money slows down then it can be incredibly stressful for you as the owner. In some cases, it’s a relatively simple fix to get things moving again, other times it can be more sinister and be a clue that your company is on a downward spiral. Here are a few things to consider if you’re noticing your earnings aren’t as good as they were. 

Unreliable equipment

Most businesses will have equipment that they need to make their company run, it could be anything from industrial printers to ovens to forklift trucks depending on the nature of your business. When these pieces of kit break down, it can mean time and money lost in your company; while occasional breakdowns will happen no matter what you do, if they’re happening all the time then something needs to be done. It can be a struggle for smaller or newer companies, when you don’t have the cash up front to buy new and the most modern equipment then you might feel your only choice is to go second hand. But there are ways around this, for example you could hire equipment from a third party company. While there will be costs each week, month or year, if anything goes wrong and it breaks down then it will be fixed with no expense to you. Providing of course that you weren’t responsible for the breakdown. This gives you peace of mind, and later down the line when you’ve earned more money you can look into investing in high quality equipment yourself. Once you do, make sure your equipment is insured so that if anything goes wrong, a replacement or repair can be organized quickly. Having some form of backup equipment or making sure you’re ahead with work means if you are stuck without an item you need, you’re not losing money or letting down clients or customers with orders.  

Theft

Theft costs companies serious amounts of money. Maybe you’re a shop and thieves are putting smaller items into their pocket, or it perhaps an organized have managed to steal large amounts of stock, money or data. Always ensure that your premises are firmly locked up with proper security measures to try and avoid this, such as lockable shutters and a sturdy safe. Don’t keep excessive amounts of money overnight, even if you feel it’s safely locked away- you’re much better off arranging regular cash collections. 

Unsuitable marketing

When it comes to marketing, you really do  need to spend money to make money. It’s not enough to have a good business selling things that people want, with so much competition out there you need to get the word out there to the right customers. Marketing can be expensive but its something within your control, you can work with a marketing agency who will put you on the right path to success and have the skills and experience to make that happen. It can be annoying as a small new company to have to spend huge amounts of your budget on promoting, but without it you simply won’t succeed. The last thing you want is to have to dissolve your company due to silly mistakes made on your part. If you’re noticing a decline in sales, it might be a case that you need a new strategy or some new marketing materials.

Legal issues

As a business, there are all kinds of legal obligations that you’re responsible for- and if you neglect any of these things there can be serious repercussions. Perhaps an employee or customer slips and falls on a wet floor where no sign was put down. Maybe a customer has an allergic reaction where ingredients weren’t properly listed, or you employ someone without running strict enough background checks and they’re not entitled to work in the country you’re in. In many cases, these can be very easy mistakes to make but put your whole company in serious jeopardy.  For this reason, it’s important to make sure that you have the right insurances. If legal proceedings are ever taken against your business, you won’t end up out of pocket- it covers your back if the worst were to happen. Legal issues can be incredibly expensive, if you’re not insured there’s a huge chance it will end in bankruptcy. 

Poor customer service

Customers expect a good standard of service when they shop with a business, you’ll know this as a customer yourself. If you received a rude or cold response from a company, would you return or would you shop elsewhere? Business is highly competitive, so whatever it is that you do or sell, there will be plenty of others out there doing something similar. Train staff so they’re dealing with matters of customer service correctly, and make sure everything is handled in a polite and timely manner. Many businesses rely on repeat custom to make a profit, so don’t overlook the fact that poor customer service will result in lower profits.

What Is Free Cash Flow, And Why Is It Important To Your Business?

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If you’ve dipped into accounting because you’re thinking about starting up a business, then you may have come across the term “free cash flow.” But what exactly is FCF, and why is it important?

What Is Free Cash Flow?

Free cash flow is the amount of money your business generates after deducting operating expenses and the cost of buying assets, like equipment or buildings. Free cash flow, therefore, is what matters when you want to buy anything else for your business, like hiring new people, reducing debt, or paying yourself a dividend.

Why Is Free Cash Flow Important For Small Businesses?

Strategy consulting firms know how important it is for businesses to have healthy FCF to expand their operations and grow. But it’s not something that’s appreciated by many owners themselves. Here’s why FCF is so essential.

Strong FCF Improves Your Negotiating Position

Companies that have strong FCF are able to meet their obligations to suppliers more reliably. A business generating excess cash above regular expenses has more money on-hand, there and then, to pay other firms for the services it needs to provide value to customers.

From the perspective of other businesses, this is a good thing. The more cash that a company has available, the more likely they are going to be paid and, hence, the more likely they are to offer favorable rates. Take a lender, for instance. A lender, like a bank, who can see that your firm is generating extra cash every month is much more likely to lend at a lower rate than if your FCF is negative because they believe that they stand an excellent chance of being paid back.

Suppliers also like lots of free cash flow. The last thing they want is to make a delivery to your firm, only to find out that you don’t have the funds available to pay them.

Good FCF Helps To Pay Down Debt

We’re currently living through something of a debt explosion. Companies, both large and small, are taking advantage of low-interest rates to fuel their activities. But many see the era of low-interest rates coming to an end. Central banks have already committed to raising rates, and quantitative easing has come to an end.

Businesses with good FCF are in a much better position to service their debt and pay it down than other companies in the market. If you can secure good cash flow at the end of each quarter to meet your debt obligations, you can reduce your overall payments long term.

Good FCF Gives You Freedom To Invest

Finally, having good FCF gives you the financial freedom you need to do what you want. You can either take the FCF in the form of a personal dividend, boosting your own income, or you can keep cash on-hand to take advantages of opportunities when they come your way: the choice is yours.

Building efficiency and leanness are essential if you want to be able to generate plenty of FCF. Is your company lean?

Succeeding With Your Business Budget

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One of the more important parts of running any business is always going to be the budgeting. You have to make sure that the money is going well and smoothly if a business is to remain in function for a long time, and the better you do this, the more of a chance you have of really bringing your business to the fore. But plenty of people who have their own business actually find it pretty difficult and challenging to look after their business budget effectively, and if that sounds like you then you might be wondering what you can do to make it all work out a little better. In this post, we will discuss some of the approaches which are going to help here, so that you can expect your business to be budgeted much more effectively, with all the benefits that is going to bring.

Miss Nothing

If a budget is to be exact, you need to make sure that you are aware of every single cost that you have ahead of you, and that you know exactly what it is going to be. You also need to make sure that you are aware of the frequency of each of those costs, particularly those which you will have to pay out routinely and regularly. If you are having to buy, say, gas oil drums every two weeks, it would be foolish not to have that in your budget. Whatever it is, however small you feel it might be, you need to include it. If you don’t, you will only be creating a budget which is not really effective, and that will mean that you can’t expect to be able to trust in it, or in the future of your business itself.

Be Real

It can be tempting or easy to simply try and skirt over a few financial issues when you are budgeting out your business, but this is the kind of approach that is only going to lead to disaster. Ensuring success with your business budget means that you are going to have to be as real as possible, and that is something that you might find particularly challenging if you are not used to that kind of way of working and thinking. Nonetheless, it’s clearly the best way to go: being real with yourself about your budget means it is going to be accurate, and ultimately that will result in a more successful business on the whole in no time. There is no getting around this, so make sure that you are doing it properly.

Remember The Profits

You can’t budget without considering the profits, and you should make sure that you are planning for some kind of a rise in profits at most times, for that is what you should be aiming for. If you fail to do that, you will only actually cause yourself confusion, even if you feel that you are erring on the side of caution. It is much better to make sure that you are keeping the realistic profits on the balance sheet.