When it comes down to it, the financial stability and prosperity of a company is always the best indicator of how a company is doing. However great the idea is, whatever the industry if the numbers don’t add up, it’s difficult to get things back on track.
Even if you pass the business loan eligibility and manage to secure funding, you must keep a close eye on the numbers to avoid falling into a slippery slope. Plus, with unique challenges along the way like COVID-19, other than securing a business loan, you also need to prepare for contingencies and unforeseen situations. So, how do you maintain the financial health of your business, so your well-laid plans come to fruition?
1. Plan ahead and set a budget
While this goes without saying, surprisingly many businesses fail to incorporate prior planning into their to-do list. You cannot overlook the importance of planning and budgeting, especially for those who need a business loan or operate on a lean model. With a plan and budget, you can stretch every rupee to the maximum. What’s more, a budget will give you clarity and confidence with your projects. If you are taking a loan, you might also want to use a business loan EMI calculator to see how much you need to budget every month.
2. Cut costs to increase revenue
Let’s say your business loan interest rates are low and you have ample capital to survive the short-term. However, to manage your funds and maintain your financial health in the long term you need to look at cutting costs and increasing your income. It’s one of the money-making rules to live by to maximize your profit margins. To cut costs, you can shop around for new vendors or eliminate any unnecessary spending. To increase revenue, look at loyalty programs, adding new products for sale, promoting existing products, or offering discounts.
3. Track your spending
Whether it’s been a few weeks or a few years, it’s important to keep track of your expenses. This applies to all aspects of your business and not just your business loan EMI. Failing to track your spending will result in small bills piling up, or worse, misusing or overspending funds.
4. Have a consistent cash reserve
The lifecycle of a business includes unexpected events- having a cash reserve or a rainy-day fund can help get you out of a tough situation. What you can do is estimate how much you need for business expenses monthly and keep a reserve worth six months of expenses. You can use this money for general expenses too, ensure you consistently deposit money into this account to protect yourself against unforeseen circumstances or costs in the future.
While you might read up on money management tips, it’s extremely important you follow them in your business as well. When you apply them, you can ensure the business loan you’ve taken will improve cash flow and add to your revenue.