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  A financially healthy business is one that has sufficient cash to meet its obligations, efficiently controls its costs, and consistently generates profit. It’s a state of affairs that many business owners want for their enterprise. However, most companies fall short of it—which explains why business failure rates across the world are so high.
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If you’re going to avoid becoming part of that statistic, you’ll have to ensure that your business is in good shape financially. There are several ways to achieve this, but they all come down to tracking your finances and plugging holes in your operations and cash flow. What follows is a discussion of some of the best ways to improve your business’s financial position.

Reduce Expenses

Have a look at your business’s expenses. There could be items that you can either do without or spend less on. There are two types of costs you’ll need to examine. One is variable costs, which increase or decrease with the units of goods or services your produce. They include the cost of goods sold (COGS), production inputs, packaging, and power. The other is fixed costs, which don’t change with the number of products churned out. This refers to such costs as rent, insurance, depreciation, and salaries. Examine variable costs from the recent past, and decide whether there are things that you can trim off. Fixed costs may be harder to bring down, but you could reduce some of them by comparing offerings from competing suppliers where they exist.

Tweak Prices

You can boost your revenues by changing your prices. Depending on what’s going on in your industry, you could either increase or lower your product prices. An increment could work if your product or service is somewhat price-inelastic, i.e. if a price increment won’t cause your customers to buy substantially fewer products from you. If you’re wondering how to do this, you’ll find tips in our article, How to Raise Prices Without Losing Customers. It’s also possible that cutting prices could cause more people to buy your product. Many buyers are attracted to cheaper items, as they give buyers a sense that they’ve secured a bargain. If you have a sufficiently high uptick in sales due to lower prices, your revenues will exceed what it was before the price reduction.
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Provide Customers With Several Payment Channels

Customers may decide against buying from you if you don’t collect payments via their preferred channel. You might think that this is inconsequential; it isn’t. The number of customers who don’t use the payment option you provide could be substantial enough to cause you to lose money. Also, even the people who use your favoured payment channel could decide to switch to another one for any number of reasons. If they realize that you don’t offer other options, they could move to one of your competitors. Enabling multiple payment options—cash, bank cards, mobile payments, or electronic fund transfers –will make it easier for customers to pay you, and attract more patronage.

Constantly Update Accounting Records

Without an up-to-date accounting record, you may not be able to get an accurate picture of what’s going on with your business. Incomplete financial records might give you a false impression of the health of your business, and set you up for failure. To prevent this from happening, make sure you update your books as often as you can. Capture daily transactions, cross-check details and reconcile accounting statements. Accurate records will help you make the right decisions and take appropriate steps to improve your business’s state. If you’re wary about having to maintain accounting records, you could either hire an accountant or outsource this role to a small business bookkeeping company.

Other Steps You Can Take

There’s more you could do in addition to the steps we’ve explained so far. For instance, you could work with a budget that’s both as lean and as realistic as possible. Doing this would require a survey of current costs, projections for likely future costs, and a commitment to reasonable frugality. Do what you can to stick to your budget. Resolve to collect customer debts faster. You may have to come up with innovative ways to bill quicker. Request upfront deposits, offer incentives for early payment and send out invoices earlier. There are more tips in our article, How to Get Customers to Pay Faster. If you’re struggling with debt, you’ll find these articles useful: Finally, you could sell business assets that you seldom use (or don’t use at all). This will get you more cash while allowing you to focus on achieving higher productivity with fewer, more important assets.

Final Words

If you would like to make your business more financially buoyant, you can work with the points we’ve discussed here. By taking a combination of these steps and adapting them to your enterprise, you’ll boost its growth prospects and set the stage for its success. Featured Image Source: ACE Money Transfer
Got a suggestion? Contact us: editor@connectnigeria.com
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This article was first published on 2nd November 2021

ikenna-nwachukwu

Ikenna Nwachukwu holds a bachelor's degree in Economics from the University of Nigeria, Nsukka. He loves to look at the world through multiple lenses- economic, political, religious and philosophical- and to write about what he observes in a witty, yet reflective style.

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