Overcoming the Financial Challenges of a Growing Business

A business expansion comes with its share of risks and responsibilities. It is no surprise that so many entrepreneurs dread the same despite the significance. However, the truth is that by preparing yourself in advance you can plan better and overcome the challenges easily.

The following are the top financial challenges that are set up against when expanding your business:

  1. Slow Cash Flow

In an ideal world, your business cash flow would keep pace with the growth. However, that’s seldom the case in reality.

When growing your business, you need to make sure that enough revenue is generated periodically so that your increased expenses can be dealt with easily. If you have any debt, then you must take that into consideration as well.

Many times, cash flow is not as speedy as you want it to be. So, you can enact some policies that can minimise the risks. For instance, you can create a “one-week-maximum” invoice clearance policy, as per which the clients making the payments after one-week grace period will have to pay an additional fine. Similarly, you can notify your vendors to supply the products/services on time to keep everything in sync.

  1. Funding

While optimizing cash flow is important to prevent potential obstacles that can hinder business growth, you also need more money for new equipment, marketing and sales instruments, extra staff, and more. For this, going the traditional way such as angel investors could be a good idea. However, you can benefit even more from alternatives such as:

  • Crowdfunding Campaigns: This can work out excellently if you are planning to launch a new and innovative product(s) that the people are likely to be excited about.
  • Invoice Financing: Invoice Financing has been around for decades and is a good option if your business is already doing great.
  • Peer to Peer Lending: You can get better interest rates at better terms for a business loan from a P2P firm in comparison to a traditional bank.
  1. Finance Management

Managing money in a business is difficult itself. However, when the business expands, then additional moving parts emerge on the surface and the structure becomes complicated. So, a smart thing to do at this point is to get a CFO onboard.

You need a finance expert to handle all the money if you want a smooth ride ahead. However, if that’s too “expensive” for the business at this point, you can hire a good accountant or someone from with similar skill set. At the very least you should have an enterprise-level accounting, finances, and expenses management software program to make money management easier and simpler.

  1. Staff Costs

As your business grows, you need more workforce, more staff. However, it can be difficult to pay all the employees full salaries without affecting the cash flow. So, you can take a smart approach towards it such as:

  • Outsourcing: More and more people are working remotely these days as crowdsourcing is becoming a popular trend in the recruitment industry. You can find all kinds of talents-accountants, programmers, designers, personal assistants, at what not, with different remuneration requirements and expertise. Moreover, it’s easier to find a decently skilled employee at a much lower rate on a contract basis.
  • Fresh Recruits: If experience is not really important to you, then you can also consider hiring fresh college graduates. The plus-side of this is that you don’t have to pay them full salaries. In fact, you can have them work for free in exchange for some quality experience.

Finance is at the core of every business. So, be sure to know your numbers at all times. There will always be problems- even more when your business is growing since they are a part of the journey. However, if you know your numbers and think clearly, you can overcome any kind of financial obstacle and move ahead.

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