Why Your Business Isn’t Making Money – How To Fix It
Businesses can have a great product, happy customers, and consistent growth, but still struggle to make money. This often happens with start-up companies, but even well-established companies with long histories can be afflicted. Often, it can actually be a symptom of quick growth, as all of the business’s focus goes to delivering their product or service to keep their customers happy.
To capitalize on successful delivery and happy customers, you must have a sound financial strategy. Some key finance elements will turn a break-even business into a profitable one without increasing sales or changing prices. This article will highlight these strategies and show how even a busy business owner can implement them.
Diagnosing the Problem
The fundamental issue is that most businesses don’t have the expertise or software to diagnose the problem accurately. The most reliable way to solve this issue is to bring in an experienced outside consultant to analyze the business’ finances. As a starting point, here are common areas for improvement.
Cash Flow
Having cash flow issues often means you don’t have the funds to invest in projects, staff, or inventory when you want to. Improving your accounts receivable process means that money will come in sooner, allowing you more freedom in allocating resources. Being short on cash also means you may face pressure from your creditors, making it harder to access financing in the future.
Financing
Borrowing money or having a line of credit is expected and extremely useful for growing businesses that feel the pressures of tight cash flow. However, what should relieve pressure can actually become a source of stress if it is not well-structured. Personal loans, credit cards, or high-interest business loans come with high monthly payments, tightening cash flow and increasing monthly costs.
Businesses with high monthly payments should seek expert debt management services to restructure their payments. Consolidating debt reduces outflow and increases profitability.
Strategic Management
Strategic finance management goes beyond debt financing to understanding and anticipating what will happen in the market. This could be related to interest rates or inflation that may affect your borrowing in the future. It could also be seasonal demand in your specific market or other increasing inventory demands or costs that you must plan for.
Operational Efficiency
Every business can increase profitability by reducing waste and becoming more efficient. Automating repetitive processes and outsourcing non-core business tasks provides staff additional time to focus on what’s really important within the business. They’ll spend less time on boring jobs where errors can stack up and instead focus all their expertise on coming up with creative solutions to push your business forward. Making these simple changes dramatically improves operational efficiency.
Outsourcing the Finance Department
Hiring an outside expert is a cost-effective and efficient way to get your finances back on track. They have the experience and software to accurately diagnose the issues and introduce best practices to change a company’s profitability.Contact CFO Hub today for a fully customized solution for any business accounting needs.