business

Reasons why you need to keep records to run smooth business

If you are running a business, then you must be aware of the importance of all the transactions that you are making under the name of the business. It is highly recommended to keep a record of all the business transactions. For running your business smoothly, you must always pay close attention to the details of business records. If you have been running a business for a while, then you must know that the business records will play a major role in different situations.

You will have to keep good business records for multiple purposes and keeping all the records will save you time and will help you in the productivity of your business. Whether you are paying taxes or comparing your yearly expense sheet, your business records will come handy.

Maintaining accounts of your business is the most important thing that you need to focus on. We will be discussing few important reasons why you should focus on keeping a good record of your business. Let’s have a better look at few reasons to understand the importance of keeping the business records.

Preparation of the financial statements

While preparing the financial statements of your business, you will require a complete transaction record of your business. Whether you are preparing a balance sheet or income statement of your business, you will have to check all the records to list down every single transaction. If you don’t have a record of the transactions, then it will become almost impossible for you to prepare a balance sheet and income statement of your business. You will have to create a profit loss statement of your business, and you can only do so while keeping all the records of your business for the past business year.

Getting a business loan

When you are trying to get a business loan from a lender, you will have to show some financial statement. When you are applying for a loan, the lender will take a close look at your business financial statements before issuing the business loan. If you don’t have a good record in shape of business financial statements, then no one will give you a business loan. Not keeping a record is never a good practice of running a business smoothly. When you are applying for a business loan, you will require all the proof that will help lenders understand the authority of business.

Preparation of tax returns

There is another thing that you will have to take care of when you are trying to run your business smoothly and it is filing tax returns. Every business is obligated to file tax returns and you can only do so if you have a complete record of business transactions. It will help you prepare tax returns and you will be able to show the gains and expenses of your business in your business tax profile. If you are keeping good records of your business, then you will be able to prepare the tax returns easily.

For supporting items on your tax returns

If the government wants to see your records and you are unable to provide all the records, then you will face multiple issues. This is exactly why you should always keep good records. If you are not careful about keeping your business financial statements updated, then you should know that it can hurt you really bad. You will have to show the statements and records to support the items that you have listed on your tax returns. If your financial statements do not support the tax returns during the audit, then you can face penalties.

Helps you managing expenses

Another important reason why you should always keep your records updated is to manage your expenses. If you are not recording your expenses, then you will never be able to know how much you are spending on multiple items. To support the arguments, you must have proof, and in order to get a proof, you must keep good records of your business. It is the only way to cut the cost and improve the productivity of your business. Make sure that you are keeping your expense sheet updated so you can avoid all the problems.

Track your spending on purchases

Most of the businesses don’t track the money that they have spent on their regular purchases. Well, if you are practicing the same, then you will never be able to know about the money you have spent on the business purchases. To keep the record of the money you have been spending on necessary purchases, you must keep a good record so you can tally the sheets later on. You must always focus on cutting the cost, and you can only do so if you are well aware of the money you are spending in the first place. Keeping your financial statements helps you in various ways and it helps you run your business smoothly.

swift payments

How can You Replace SWIFT Codes in Your International Inward Remittances

There are many ways to process the inward remittances, i.e. the money transferred from a foreign bank account to an Indian bank account. However, SWIFT payments are old and still preferred options by many individuals and businesses in India.

What are SWIFT Payments? How do They Work?

SWIFT payments are wire transfers made between two international bank accounts through the SWIFT international payment network, which is one of the largest financial messaging systems in the world.

For your international customer/client to send you payments via the SWIFT mechanism, they need to follow the same steps they follow when making wire transfers locally, which are:

  1. Log into their online banking service.
  2. Initiate an international wire transfer by entering your details, which are:
  • Your name and your bank’s name
  • Your account number or IBAN (International Bank Account Number)
  • Your SWIFT code (can be obtained from your bank’s website)
  1. Enter the currency and the amount of the transfer
  2. Verify and approve the transfer

Now, even though SWIFT payments are the classic way to send or receive payments to/from your international businesses, it’s certainly not the best. This is because we live in the era of Fintech where better options are available. This is the period when the finance industry is teeming with technology to offer businesses and individuals faster, reliable and cheaper services. So, you no longer have to make do with whatever options you get from your traditional bank.

Drawbacks of SWIFT Payments:

  1. High Charges

For every payment that you receive from your international client, there are multiple deductions- a flat fee for each transaction, currency conversion charges, and even handling fee or miscellaneous charges by third party service providers.

  1. Slow Transfers

Payments made via the SWIFT network can take as many as 4 days to reflect in your bank account.

  1. Inefficient Process

The very process of SWIFT payments is inefficient and more of a hassle. Imagine what your customers have to go through when making a SWIFT payment for the first time- entering your bank account details in their online banking service, enabling international payments (if disabled), increasing the wire transfer limit (if necessary), entering the payment amount and currency, and then finally authenticating the payment.

Today, we like to make most of the payments with just a few taps on a smartphone or a few clicks on a computer, which is why the SWIFT payments clearly appear outdated and slow.   

Alternatives to SWIFT

Foreign Exchange Companies and eWallet Companies are two good alternatives to SWIFT if you are looking for a reliable service and lower costs. However, from a business’s perspective, you can benefit from a lot more from a dedicated payments platform. The reason behind this is that you are going to send and receive a great number of payments, and for that, your selection of payments option is extremely important.

A dedicated payments platform which you can actually combine with your invoices is the right way to manage your inward remittances. The following are some of the top reasons why:

  • Making payments is easier for your clients when they don’t have to enter your banking details on a portal for every new invoice.
  • Your clients can enjoy multiple payment options, especially the credit cards.
  • You can receive payments much faster than other methods.
  • The transaction fees are much lower.
  • It gives your business a professional touch and increases credibility.

By integrating a dedicated payments service into your invoices, not only you can make it easier for your clients to make the payments, you can also make it easier for yourself to track the payments and review the cash flow. Imagine the kind of time you can save when checking the payment status of dozens of invoices every month, and identifying your best clients with this.

expense management

Top 6 Expense Management Tips for Small Businesses

For every small and medium-size business, expense management is one of the most important things. If a company is unable to manage the finances, then it can certainly have huge impacts on its employees and reputation. No one wants to work in a company with huge expenses and little to spend on the employees. There are various ways to improve the finances of your company. As a decision maker and board of director, you will have to focus on your expense management skills.

There are multiple ways to cut costs and improve the revenue stream of every small business. If you have just started your business and your expenses are going out of hand, then you should start working on the expense management and try to find the root cause of the problem.

However, when you are trying to improve the business revenue and trying to manage cash flow by cutting the costs, you will have to be very specific about your options. Most of the expenses involve comfort of the employees. If you are doing expense management, then you need a person who is good at it. Let’s have a better look at some tips that will help you manage your business expenses properly.

Don’t ever merge business and personal funds

First of all, when you are trying to manage your business expense, then you must separate all accounts. If you are merging the business and personal funds, then you will end up facing some huge issues. Most of the entrepreneurs make this specific mistake when they are trying to manage their business expenses. If you are doing the same thing, then you won’t be able to manage your expenses properly. Your business funds will always remain short if you are also using business funds as personal funds. Always keep in mind that the business is a separate entity and you must follow the rules when you are doing business.

Control and negotiation of business purchases

Of course, every single business has multiple expenses. Moreover, the businesses have to make purchases and use external services. These are the necessary expenses and you cannot get rid of them if you want to run your business. However, there are ways to reduce the cost of your purchases. If you are doing your research and spending your time to find the right vendors, then it can save you thousands of dollars by the end of the business year. Always take control and try to negotiate when you are making business purchases.

Look for discounts on the purchases

Just like taking control of your business purchases, you must focus on getting discounts on the purchases. If you have employees who are purchasing different products on a monthly basis, then you must train your employees to find discounts on every single purchase. Every company usually purchase items in bulk. If you are making purchases in bulk, then it will become easier for you to get discounts on your purchases. All you have to do is to train your employees to negotiate the prices when they are making purchases.

Try to make your expenses variable

There is a basic difference in a variable and fixed expenses. If you are trying to make most of your expenses variable, then it will become easier for you to manage your cash flow accordingly. If you have less cash flow to make business purchases, then you must consider making your expenses variable. If you are making your purchases variable, then you will be able to have a control over your expenses. The good thing is that you can always change your variable expense when you want to.

Always keep an eye on cash

One of the main concerns of every business is to have some cash in the petty cash. If you are not tracking your expenditures, then your expenses will go out of your control. Make sure that you are keeping a strong eye on the petty cash and watching the expenses of the business. Most of the time, the small expenses of the business are managed through petty cash. If you need groceries or something else for the office, then you would normally use petty cash. Make sure that you are always keeping an eye on the cash and managing things properly. It is one of the best ways to do expense management for every single business.

Start using best expense management software

Even if you are a small business, you should take help of technology and minimize the errors. By using the perfect expense management software, you will be able to record every single expense and then tally your accounts accordingly. You can always start your research and find the perfect expense management software available out there. However, you must use the software properly and get maximum benefits provided by the technology so you can avoid every single problem.

SMBs Need to go Paperless Now More than Ever

For a long time, before e-commerce and digital media snowballed into indispensable entities for the trading industry, every small and big business war primarily influenced by one-to-one interactions with its customers. paperless

Most of the business was done through brick and mortar stores, which is why paper played a big role in the process- the invoices were submitted in paper, receipts were in the paper, and even the brochures and other forms of marketing material etc. were in the paper. However, those days are long gone.

Today, your business will only struggle to survive unless you embrace the digital tools and services that have become the norm.

In fact, as we are making progress in powerful technologies like artificial intelligence, deep learning, natural language process, etc. by leaps and bounds, it won’t be an exaggeration to say that paper will be scaled down to play just a small role in our lives in the near future.

Image Source

Today, a large number of business processes, including lead identification, lead conversion, marketing, payments, talent acquisition, etc. are executed on the Internet with digital tools and technologies.

Thus, the Small and Medium Businesses (SMBs) need to adopt paperless methods now more than ever because of the following reasons:

  1. Time Saving

Why would you want to waste hours in reconciliation using paper invoices and receipts when even a decent software program can do that for you in less than an hour?

When the startup industry is becoming so competitive, then there are only a few things left that can give you an edge over others, and time is easily one of them.

With enterprise-level software programs for bookkeeping and invoicing, you save more time for identifying and nurturing more leads, or expanding your business in new areas while your rivals stay busy with their paperwork, collecting and organizing files and documents.

  1. Easy Access

One of the key characteristics of every competitive business is that they know how to make bold decisions without delay. But how is this possible?

To make decisions for your company, you need to consider a variety of factors, your revenue collection, the performance of individual products offered by your company and that of your staff, market penetration, etc.

Now, if this were the 80s or 90s, you would have limited options to pursue that task. However, today there is no death of powerful software that are capable of offering detailed insights into your business and accurate reports.

With these, you can get on top of every small process of your business, manage cashflow with a high level of accuracy, and identify areas that need the most improvement easily.

  1. Increased Productivity

With digital technologies, your employees can be the most productive. They can share files with each other without leaving their desks and collaborate on the fly with cloud-based office suits.

They can also communicate with each other conveniently through a secure in-house IT network, and even mark their attendance automatically by using mobile-based GPS technology.

In fact, there are all kinds of ways your employees can excel their duties when equipped with the right tools and technologies.

  1. Limited Human Errors

There are some things that a human can do better, such as writing a poem or painting a picture. However, when it comes to calculations or analytical tasks, then clearly a computer takes the lead.

Since accounting and bookkeeping is a tedious yet critical operation of any business, by making it automated, you can minimize instances of discrepancies and plug cashflow leaks that result from poor management.

The Inevitable Change

We are already living in a world where businesses are largely paperless. Even the small mom-and-pop stores, local service providers, etc. are adopting the “paperless” ways to enhance their business through mobile wallets, digital marketing (online classified portals, for instance), and digital invoices, etc.

In other words- the change is inevitable. However, the best time to completely revamp your business infrastructure towards automation and technological adoption was 5 years ago. The second-best time is today.

Top Mistakes Business Owners Make

Business owners make mistakes all the time. If you are running a business, then you must be aware of the problems that you have to face in day to day operations including cash flow management. However, if you are not focusing on resolving those problems and mistakes, then it can raise a lot of problems for you in the future. To avoid the unwanted and unpleasant situation in your business, you must keep track of every single thing.

Even if you have forgotten to do something important, you can always set reminders to get the work done later. For every business owner, it is necessary to make mistakes and then learn from them. However, you should never repeat the same mistake over and over again. One of the hardest part is cash flow management for the startups. Starting a business can be a hectic task and maintaining it is even tougher.

If you are just starting your business, then you should dig up few common mistakes that most of the business owners make. We will be sharing few common mistakes that most of the business owners make. Let’s have a look at some of the mistakes.

Not focusing on customer needs

Of course, you are running your business to provide top-notch services to your customers. It is necessary to complete all the requirements of your customers. If you are trying to improve your business income, then you must listen to the suggestions provided by your loyal customers. It will help you improve your business income and will help you capture potential clients. Make sure that you are taking care of your customer’s needs and requirements. If there is something that you can do to improve the products or services, then you must take immediate action and plan new strategies to improve things for your customers.

Not caring about the business database

There is no doubt that every business database is worth a lot. If you are not caring about the business database, then you will end up facing a lot of problems. If you have a lot of customer’s data, you must create a database and then also keep the backup to avoid future problems. If you end up losing all the information, then it can have a drastic effect on your business. Make sure that you are backing up all the business information to avoid problems. You can ask your employees to back up the information on a regular basis.

Forgetting about your online appearance

Even if you are doing a local business, you will have to focus on your online appearance. It helps you capture potential clients. Moreover, it also helps you improve the reputation of your business. Having an online appearance can help you raise your income. If you are running a local business, you must have a business website where your potential clients can have all the information that they need about your business. You can create few landing pages that will help you capture the clients quickly and will help you improve your services.

Not managing the finances properly

Cash flow management is the most important part of managing your business. If your finances are not managed properly, then you will end up facing huge problems. One of the most crucial thing for every business owner is to pay the salaries of the employees. If you are not managing your finances and if you don’t have money to pay the salaries on time, then it can create huge problems for you. You must always focus on cash flow management and keep track of your transactions. Make sure that you are focusing on all the expenses and creating a budget of every month. It helps you keep track of your finances.

Not reinvesting in your business

It is always better to have multiple business ideas. However, investing your money in new ventures can also create problem and shortfall. If your current business demands the investment, then it is better for you to reinvest your money in your current business. If you are efficient in cash flow management, then it will become easy for you to reinvest the money in your existing business. Most of the business owners don’t pay attention to reinvesting in their businesses. You must keep some portion of your profits for the reinvesting purposes. It will help you improve your business strategies and you will be able to grow your business as well.

No analyses

Whenever you are making important business decisions, you must focus on complete analyses. If you are not analyzing your business decisions, then you won’t be able to get the benefits that you are looking for. You need to check out the risks involved in your strategies and the potential growth of the business. As a business owner, you must never let go your business decisions without deep analyses. For every business owner, time and money hold almost the same value. If you are investing your time in making a new strategy, then you should focus analyzing it so you can get the results you are looking for.

payment gateway solutions

Advantages of Using an Integrated Invoicing and Payment Gateway Solution

Today, the majority of business is done online as digital payments continue to observe an exponential growth. In fact, without such services, doing business in global markets would be nothing less than a nightmare. payment gateway solutions

Truth is, apart from using invoice software there is still a lot more you can do to improve your finance management today. Embracing an integrated invoicing and payment gateway solution, for instance, can give your business a leverage over others in today’s competitive market.

Think about it- why send the invoices to your customers through emails which they have to first cross-check and then clear by approaching their bank or a third-party payment service provider?

It’s not hard to understand that it’s not the best way to do the job. So, what if you could send invoices along with the payment option right next to it?

The following are some of the biggest advantages of deploying a combined invoicing and payment gateway product:

  1. Lower Transactions Fees

While there is no dearth of banks and other third parties that offer payment gateway services for you to send and receive the payments, you do have to pay a fee for the service which includes third-party processing fees, additional transaction fees, etc.

Since you could be doing multiple transactions every month, even small fees when multiplied several times can amount to a lot. When it comes to business, cutting recurring costs by even a small percentage can often be a game changer. You should consider a payment solution that offers lower transaction fees, maintains security levels and gives you access to a wide range of currencies which can be accepted.

  1. Faster Funds Transfers

To reduce the time in the funds transfer, you should consider two things:

  1. Process of sharing invoices and payment details
  2. Time taken by the payment platform to transfer funds to your bank

With an integrated invoicing and payment platform, instead of waiting for up to a week, you can receive your funds in just 48hrs. As it helps you share invoices through email with integrated payment option which helps your customers pay immediately and also the payment platform transfers the funds to your bank in as low as 48hrs.

  1. Multi-Currency Invoicing and Invoice Management

Multi-currency invoicing allows you to create invoices in a variety of currencies quickly and easily.

Combined with quality invoice management tools such as payment status tracking and reminders you can keep an eye on the cash inflow and outflow with just a few clicks on your device. Similarly, with an easy collaboration feature anyone can check the invoices and make changes as required without having to deal with a lot of “to and from”.

  1. Simplicity in Business and Tax Management

Why make your accounts, transactions, invoices a mess by using a variety of software programs for different purposes when you can combine them all into one cohesive unit that’s not only much more efficient but also simple to manage?

With a payment-invoice program you can:

  • Create and send invoices easily and quickly
  • Save time in reconciliation with bank statements
  • Ensure all invoices are in the same place (no invoice misplacements)
  • Simplify taxes/bookkeeping
  1. A Professional Touch Payment Gateway

Freelancers and SMEs often face neck to neck competition in their space. This is the reason why even small things can give you an edge and help take your business to the next level fast. A payment-invoice program is a great example of this.

Using a new-age invoice-payment solution you can show your customers that you like to keep pace with the changing times and care for their convenience with a service that offers:

With an invoicing platform, you can also do branding easily by printing your company name and logo on the invoices.

  1. Easy Reconciliation

Invoice management can often be a herculean task unless you have the right tools. For instance, you can’t take any risk when it comes to reconciliation as even a single discrepancy in one account can make the numbers on the other accounts go all haywire. However, integrating your payment gateway and the invoicing module can help to keep the transactions and accounts organized.

  1. Easy Access, Better Control 

With cloud-based services, you can keep an eye on the payables and receivables when you are at the office, at home, or even when traveling. Going through payment reports you can also easily identify your biggest clients and other potential clients that just need to be nudged in the right direction.

Bottom Line

With a program that can combine invoice management and payment gateway services you have all to gain and nothing to lose. So, it’s not a question of “why” but “when”.

business expenses

Is Your Business Scalable? Here’s What You Can Do

Scalability is one of the most important aspects of every business. No matter which industry you are from- telecom or finance, software development or manufacturing, your business must be bbuilt-in a way that with time, you can expand it easily at minimum costs. business expenses

If scalability is a bit of a gray area for your business, then this write-up can serve as a basic guide for getting started.

Is your Business Scalable?

One thing you need to get out of your way first is, well, finding whether your business is even scalable or not. Most businesses that are based on the owner’s skill set or talent are not really scalable. This is because such businesses are limited by just one person’s abilities.

A scalable business is the one which is able to keep the costs low while increasing the revenue gradually. In fact, the less is the involvement of the owner, the better it’s for scalability.

A good example of a scalable business is a software firm. This is because while the initial investment for developing software products may be high, once that’s being taken care of, the business can simply make copies at a very small cost. Similarly, e-commerce, or rather any kind of business that’s selling products online is highly scalable. This is because revenue can be increased by promoting the business through blogs, webinars, and other popular forms of digital marketing tactics.

Making your Business Scalable

Now that you know what makes a business scalable, you can change your business model accordingly. The following are some of the key features of a scalable business:

  1. Optimum Cashflow

Cash flow problems are one of the leading causes behind business going defunct. So, if you want to scale, you must ensure a good cash flow. The following are a few tips that can come in handy in that enterprise:

  • Make it easier for your customers to clear invoices by offering as many payment methods possible. Apart from the standard debit card and credit card options, you can also offer them to pay through digital wallets.
  • Levy a penalty for late payments if you aren’t already and let your customers know about it. A good way to do this is to mention it in the invoices. When your clients will learn about the penalty, they will be more likely to pay on time.
  • Don’t merge your personal expenses with business expenses. That’s the key to good cash flow management.
  1. Partnerships

Why would a successful business want to partner with another business? What’s the need? Well, believe it or not- partnerships in the realm of business are extremely important, even for the biggest players. For instance, Nike and Apple are considered as some of the most powerful companies in the world. Then why did they join hands in 2006? They were already successful. What were they looking for? Well, the answer is Scalability.

By working separately, the dominance of Apple and Nike was limited to some areas. However, by inking a pact they were able to venture into different realms and scale their businesses. The Nike+iPod Sports Kits, Apple Watch Nike+, are some of the excellent examples that support this point.

  1. Automation

Automation is the future of businesses. There are all kinds of software available through either a SaaS or license model that you can use for automating various tasks such as invoice and expenses management, attendance management, lead generation, and what not.

There are several advantages of automation:

  • Saves time- Employees can focus on important tasks that are more suited for a human intelligence
  • Saves Money- The more business operations you will automate, the less number of employees you will need which translates to fewer salaries
  • Scaling on the Go- Automation can make scaling super easy and fast. By establishing a system that can automate the majority of the workflow, you can easily hire new employees and train them in minimum time or add and sell new products without affecting the efficiency of your business operations.

If you want your business to be scalable, you must think two steps ahead. You need to make today’s decisions based on your future projections. If only that is being taken care of, all the pieces will eventually fall into place.

Small Business

How to Reinvest Your Small Business Profits in a Smart Way?

There are two types of entrepreneurs- those who use their profits for personal use and those who reinvest the same into their businesses. Guess which of these eventually become powerful tycoons? Small Business

Smart entrepreneurs understand that a business is always hungry for money. So, if you want it to grow, you have to feed it frequently. Otherwise, working on thin margins and keeping reinvestments to the minimum can easily be a recipe for disaster.

While reinvesting your business profits is important, even more important is how you go about it. On that note, the following are some of the smartest ways of directing the revenue back into the business:

  1. Debt Clearance

If you have taken a business loan or have a debt of any kind then that should be your priority. The logic is simple- the longer you take for full repayment, the more money you will have to pay in the form of interest. So, by paying your debt sooner you can save that money and use it for growing your business instead.

  1. New Equipment for Faster/High-Quality Production

Many businesses start with a modest investment, which is why they have to compromise with used or less efficient machinery or equipment. However, to keep pace with your competition you must upgrade your equipment with time. This is especially important if you want to improve the rate of production.

So, for instance, if you are manufacturing a certain product then you can invest in newer machinery that is more efficient. In doing so, if you are able to automate some of the processes through the new equipment, then you can save the money on the salaries that you would otherwise need to pay to the workers responsible for those tasks.

  1. Marketing

Every successful businessman worth their salt know that the adage “let your work do the talking” is nothing but bogus. We live in a competitive world today where it’s nearly impossible to survive without blowing your own trumpet. Thus, quality marketing can go a long way.

You can reinvest your revenue into different kinds of marketing models- social media, blogs, YouTube, etc. You can even invest in an analytics system that will help you get a closer look at how well your business is doing on the Internet.

  1. SaaS Services

The majority of fast-growing businesses have adopted SaaS (Software as a Service). By following the same you can enjoy the benefits of enterprise quality software while paying only a portion of what the multi-billion dollar corporations pay. Moreover, you can get dedicated customer support, easy upgrading and scaling options, and automatable operations.

  1. Business Expansion

You can only so far with a limited line of products or services. If your business has been operational for a few years now, then maybe you can finally take the next big step and add more products to your catalog.

Now, there are two ways to do this: you can either get your in-house team to work on the new project, or you can simply acquire another company that’s already working in that sphere. So, for instance, if your business is only offering web based app solutions, you can acquire a decent mobile app development company and expand your business easily.

In a business, every single financial decision and every penny count. So, you must be really careful with what you do with the generated revenue. That being said, the options given above can definitely nudge you in the right direction.

Questions to Ask Before Taking a Small Business Loan

Businesses are built on capital. You need Funds for hiring employees, purchasing machinery and equipment, marketing, sales, and what not. This is the reason why so many entrepreneurs and even seasoned businessmen take small business loans from time to time to fulfill their financial requirements.

If you are planning to take one, be sure to ask yourself the following questions first:

  1. Do I Really Need This?

It is such an ordinary question, yet it is probably the most important of all. Debt is not always bad. However, the thing to remember here is timing and requirement.

What do you need the loan for? What’s the purpose? If you have tonnes of purchase orders that you can’t meet with your current revenue, then getting a loan will be a good idea. This is because it will help you increase the profits and expand your business. However, if you want a loan to get a better office space, or for buying equipment for future business expansion, then maybe you should reconsider.

  1. What’s my Credit Score?

Gone are the days when business loans could be availed on the basis of goodwill alone. These days lenders take all kinds of measures to minimize the risks. One of these is the credit history of the applicant.

No matter which bank or NBFC you will apply for the loan at, they are going to check your credit history. If it looks good, you will get the loan. However, if it’s not, then the odds are low. Best case scenario- you will get a loan at a high rate of interest. However, it can actually do more harm than good.

It’s highly recommended that you check your credit report before applying for a loan. If your score is below average and if you are not in a hurry, you can work on it first and make improvements. Once you have accomplished that you can get a loan easily and at an attractive interest rate too.

  1. How Much Money Do I Need?

There is a popular misconception floating around that a lot of money can solve all your problems, including the business problems. However, that is not really true. This is because the money you get in the form of a loan comes with several conditions. For starters, there is a high rate of interest linked to it which can make a big difference. Also, more money also means a longer term.

Ideally, you must get a loan that’s enough to increase your return on investments (ROI). If the loan is actually going to reduce your ROI then you should reconsider the entire idea itself. Also consider the fact that you will be paying EMIs every month which will be, of course, deducted from the cash flow. Plus, you need money for staff salaries, utilities, rent, inventories, and what not. The bigger is the loan amount, the bigger will be EMIs. So, be sure to see that you have enough left after dealing with all these expenses.

  1. How Long Would It Take me to Repay?

The term of the loan is something you must consider carefully. As long as you are in debt, you would need to take out a portion of the revenue every month. So, choose a term with regard to your business projections. Do you think you will be able to sustain your current cash flow after the loan, or would you need more time so as to prevent financial stress? These are some of the things to think about before making any decision.

  1. What are the Prepayment Charges?

Say, you obtained a loan for a term of 5 years. However, your business did well beyond your expectations, and in 4 years you have enough money to repay your entire debt. So, you go for it, only to find out that you have to pay a hefty fine in the form of prepayment charges.

Save for a few exceptions, banks usually charge you for repaying your loan prior to the actual completion of the term. It is best if you can find a lender that doesn’t have any such condition.

Business loans are often the best option for raising capital for your business. However, there are other options too, such as invoice financing, equity sale, etc. which you can also consider.

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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. cash flow

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.