How to avoid long‐term business financial issues
The vast majority of businesses will survive their first year in operation, but it is the period beyond that where they often struggle.
According to Ormsby Street, up to 91% of firms see out their first year, yet 40% fail to celebrate their fifth anniversary.
Business management therefore takes on vital importance in the early stages if businesses are to avoid being declared insolvent or needing recovery methods.
Cash flow management is one of the key factors to consider – many start‐up firms often focus too much on profits and aspects such as cash flow can be forgotten.
Others can set up businesses in areas in which they specialise, but lack the necessary financial business knowledge to make it a success.
There is no harm in using accountancy services and seeking advice to manage finances, but ultimately the business owner is the one best placed to spot trouble emerging.
The supply chain is also vital – while late payments and supply issues are often common, businesses can overcome them by managing their finances effectively.
From sourcing alternative finance options in times of difficulty to setting up clear payment terms, there are numerous ways for firms to ensure they have the necessary funds available to overcome any issues they face.
Those that have been in operation for longer periods of time may even want to have contingency plans in place, so that a number of strategies could be implemented should something go wrong.
Having clear lines of communication throughout the supply chain can make situations a lot easier to manage, and may mean companies grant you some leeway if you struggling with an unforeseen problem.
Businesses shouldn’t be scared to chase clients for money they are owed either, especially when so much finance is held up in unpaid invoices across the UK.
Cash flow issues will ultimately affect business performance and any firm that uses a service from elsewhere will expect to pay for it.
Finally, any business facing difficulties should seek advice at the earliest opportunity, as that should mean a wider range of options are available to them.
By Phil Smith