|Rich Best has spent 28 years in the financial services industry, as an advisor, a managing partner, directors of training and marketing, and now as a consultant to the industry. Rich has written extensively on a broad range of personal finance topics and is published on several top financial sites. Recent books include The American Family Survival Bible and Annuity Facts Revealed: What You MUST Know Before You Invest.|
Five Ways to Boost Financial Performance
For many business owners, it isn’t easy to see the forest through the trees amid the chaos of running a growing business. However, the ability to focus on critical aspects of your business that can improve your financial performance often means the difference between taking your business to the next level and struggling to survive.
Taking the time to find ways to boost the financial performance of your business can pay off big time. Here are five ways you can get immediate results.
Reduce Operational Costs
Whether for production, labor, marketing, or sales, you need to spend the money necessary to get your product or service out the door to your target market. But, if you could find ways to reduce these necessary costs without sacrificing quality or quantity, you could substantially increase your return on investment. Here are some ways to accomplish that:
Watch Your Overhead
While you may not mind spending money on operational costs because you can see the return on investment, your overhead expenses can be a drain on your business. These expenses include your taxes, utilities, maintenance, rent, legal fees, and other bills. While they may be necessary, it’s easy to lose track of your spending. Here are some ways to cut expenses:
Automate Your Cash Management
Revenues and profits are good, but if you have to wait on receivables to get cash into your business, it could put a crimp in your ability to grow. And, if cash is leaving your business too quickly, you can create cash flow problems. Work with your bank to implement cash management solutions that can speed up receivables and control payables to maximize your cash on hand. Tools such as automated payments and collections, remote deposit, and a business credit card can affordably streamline cash management to boost your cash flow.
Build Your Business Credit
Having access to capital is critical for businesses that want to expand. It also comes in handy when your business runs into an unexpected cash crunch. While your business may not be able to qualify for inexpensive bank financing right now, it is well worth your efforts to work on building your business credit so it can. A line of credit is the ideal financing vehicle for businesses that need to access capital periodically while controlling their interest costs. To start building credit, work with your suppliers and vendors to establish trade accounts that report your credit activities to the business credit bureaus. Check with your bank to see what it will take to qualify for a business credit card.
Know Your Margins
Watching your revenue and profits grow may feel good, but they don’t really tell you much about the financial performance of your business. While knowing your profits is meaningful, knowing your profit margin can tell you whether you can expect your profits to continue. Expressed as a percentage of your sales, profit margins can give you an indication of your business’s overall health and whether you are optimizing its output. Your profit margin tells you whether you are pricing your products correctly and which products are generating the most profits.
Getting revenue in the business may be job one but, if you’re not constantly looking for ways to improve efficiencies and cash flow management, your business could be stuck in neutral on an uphill climb. Taking the time to find ways to boost your financial performance can get you to the next level more quickly.
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