For many companies, finance isn’t the most exciting topic to discuss, but it’s one that can have lasting consequences for your company. Maintaining good financial health through financial planning and organization can help you avoid catastrophes, keep your business in good standing with investors and lenders, and ensure you have the funds you need to grow your business.
Whether you’re already managing finances or are just starting out, these tips on why good financial health is crucial for business success can help you streamline your approach and focus on what matters most.
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It Keeps You Compliant
Compliance can be daunting, but it’s important to be compliant and stay in good financial health. All too often, small business owners don’t realize they’re out of compliance until they get hit with an audit from their accountant or the IRS that could turn into an enormous amount of fines and fees.
What is it worth? Being compliant not only protects your bottom line but also the livelihoods of your employees.
You’ll Earn More Money:
The better shape your company is in financially, the more likely you are to make money by attracting investors, getting loans, and expanding markets. A good credit score also means being able to borrow at lower interest rates, so improving finances can help you save money over time.
It’s Easier to Plan:
It’s easier for entrepreneurs to plan when finances are strong, which makes growing a business much easier.
Entrepreneurs need a clear understanding of how cash flow will fluctuate to predict expenses. And if your business runs low on cash during lean times, you have the ability to take control before it’s too late and find ways to access capital through avenues like financing or even taking on another job.
It Makes You More Attractive to Lenders
Good financial health is crucial to business success. It makes you more attractive to potential lenders, and it can help your business get off the ground. Interest rates are always changing, so it’s important that you know what they are and how they affect your ability to borrow money.
If interest rates are low, it will be easier for you to find a lender who will give you an affordable loan at a low-interest rate. When choosing a bank or other company to invest with or lend from, consider their history and current financial position relative to yours.
You want them to have as much upside as possible because when times go well in your company, times go well in theirs too. It should also be noted that many businesses offer credit cards to customers. These cards often have a higher limit than others, but there may be certain restrictions on the types of purchases that can be made.
Some allow only fair credit card purchases, while others offer no restrictions. Suppose you are looking to maximize your purchasing power through your credit card(s). In that case, it will behoove you to spend time investigating different offers before making any decisions about which one is right for you and/or your company.
Helps You Manage Cash Flow
Maintaining a healthy cash flow is one of the most important aspects of running a successful business. What does it mean to have good financial health? It means that you are able to manage your cash flow, pay your bills on time, and generally keep your business afloat.
Here are some tips on how to steer clear of common pitfalls:
- Don’t go into debt unless “absolutely” necessary
- If you need money, try asking family or friends first. If you still can’t find funding, consider taking out an interest-free loan from a local bank, credit union, or online lender like Lending Club. Try not to use personal credit cards to borrow money because they usually come with high-interest rates
Good financial health allows you to make decisions and take actions that will lead to business success. If you’re struggling with cash flow, it may be hard to decide if you should buy a new piece of equipment or hire someone new. But if your finances are in order, the decision becomes much clearer: buy the equipment, and hire the best hands.