Small businesses often face several challenges than their larger peers. One of them is the lack of funds and poor financial management to keep the cash flow running. Most small business owners often resort to debts to keep their companies afloat; however, without the proper financial management skills, this proves to be a wrong step taken in the long run. Debts increase, and most businesses need to shut doors due to bankruptcy.
Kavan Choksi– Identify the everyday financial management challenges of small businesses
Kavan Choksi is an expert in financial management and business with a love for jazz and American music. According to him, running a small to medium-sized business is not a task for the faint-hearted. As an entrepreneur, you need to be aware of the operational and financial management risks that your small business faces all the time.
As mentioned above, small businesses have challenges; however, with the proper knowledge and awareness, you can arrest them successfully. The first step is to identify these common challenges for your small business. Once you know about them, customized solutions can be devised to tackle them successfully.
Identifying the financial challenges that affect a small business
One of the first challenges that small businesses often face is the inconsistent flow of cash. The liquid often becomes a common issue as the small business fails to keep track of unpaid invoices and other business practices that are expensive. In order to tackle this challenge, companies should create a forecast based on their historical and current market conditions. As a business owner, one must consider contingencies like changes in the industry, customer shifts, downturns in the economy, and more.
Not sticking to your budget
Running a business with the hope of assuming that there will be enough funds in the bank to pay your monthly bills is not a wise step. Your business cannot survive without a budget. In fact, this approach will put you into large debts soon. You should create a budget for your small business and stick to it. When you do so, you are not only building successful planning for the future, but you are getting a tool for the analysis of expenditures and the scope to expand your business without cash flow problems.
Your budget acts as your guide to small business growth
According to business and financial expert Kavan Choksi, you should use your budget as a guide to planning expenses for your small business needs. Your budget must be flexible- this means you should evaluate your income and expenses regularly to make changes. The elastic differs from the static budget, stays for a more extended period of time, and serves no purpose to your business needs after a while.
Your budget must include the following expenses one-time costs, variable costs, fixed costs, statement for cash flow, and profits. You should also include the space for savings for emergencies that may crop up unexpectedly. Last but not least, ensure that you have cash provisions for unforeseen costs that might derail the growth of your business in the future. Cash reserves for a rainy day should never be ignored, and it will give you peace of mind in case of unforeseen expenditure crops up suddenly.
