How to improve your business’s financial position?

Finances are one of the most challenging aspects of running a business, particularly for startups and small firms.

Many entrepreneurs fail in the market owing to a lack of finances or financial challenges they cannot handle to sustain their firm. So, ensuring sound financial performance for your business is key to success.

That is, however, easier said than done.

Financial challenges are common in business, and predicting financial outcomes is often difficult.

For example, you might pay unexpected expenses or overestimate your profit projections.

You can plan ahead of time for worst-case scenarios and ensure that your company has enough cash to continue operating effectively.

We have listed below ways to improve your business’s financial position.

Table of contents

What is a Financial Position?

Financial position is the current balance of an organisation’s recorded assets, liabilities, and equity.

The balance sheet, one of the financial statements, contains this information, showing an organisation’s financial situation as stated in the report’s header.

Hire an Accountants

The term can also refer to a company’s financial situation, which is determined by studying and comparing the information in its financial statements.

It typically involves computing various financial ratios from the supplied data, plotting the results on a graph, and comparing them to those of other companies in the same industry.

11 Ways to improve your business’s financial position

1.  Use cloud-based software
The first step towards fixing any problem is understanding what is causing it in the first place!

Managing a business’s finances necessitates looking at a lot of data, which can be overwhelming if you aren’t a skilled accountant.

Making the challenge even worse, the volume of data you must analyse daily may easily consume your entire day — but not if you use cloud-based accounting software.

You can access your financial data from anywhere with a cloud-based solution. It also automates many processes connected with managing your company’s finances, such as tracking expenses and sales figures.

With accurate real-time data at your fingertips, you’ll be better equipped to comprehend your financial condition and take the required steps to gain control.

2.  Improve your record-keeping skills
You must ensure that your records are accurate and up to date. The only way to improve your financial situation is to have a realistic picture of your finances. You can do it yourself or hire a professional, but your records will be your most crucial decision tool.

The profit you make from each product and which product is the most profitable are some of the details you’ll need to know.

Your cash flow should not be stretched too thin, and being aware of your financial situation can assist you in making decisions about future tool purchases, investments, and changes to your offer.

3.  Determine your day-to-day expenses
Are you aware of which overhead costs are causing you to lose money?

You’ll soon be in financial trouble if you don’t have enough money to meet fixed expenses like employee wages, rent and utilities, or insurance (not to mention hidden charges like permits, licences, and taxes!).

Cloud-based accounting systems and employee management software can assist you in keeping track of your most essential and common expenses so that you always know where your money is going. It will help you stay in control of your budget.

Divide your expenses into core, non-avoidable and ones which you can avoid.

4.  Stay on top of invoices
Managing invoices is one of the most challenging tasks for retailers, particularly those in the B2B sector. Late payments, or non-payments, can empty your financial resources.

Keep track of any payments that have not been paid by the customer using your cloud-based accounting system. You will get paid if you send out accurate invoices promptly.

It is highly suggested that you make payment terms and conditions clear from the start to ensure that invoices are paid (including payment deadlines). If an invoice is not paid, you will have legal resources to collect outstanding debts.

5.  Make proper use of inventory management
The items in your warehouse and whether or not they are sold will significantly impact your profits.

As a result, businesses physically transporting products must utilise an inventory management system to track stock levels automatically.

You can check how much of each item you have in stock by using a cloud-based inventory management system, which also provides up-to-date statistics on sales trends.

With this information, you can accurately estimate incoming seasonal demand and maintain complete inventory control.

For example, if you observe that some products are more popular while others generate little or no profit, it’s time to rethink your offering.

It could include removing specific products from the sale, at least temporarily, to avoid wasting resources on items that aren’t frequently purchased.

This way, you won’t have to worry about your most popular items running out of stock and won’t waste money by ordering inventory that isn’t required.

6.  Sell unused or unwanted assets
Do you have items you no longer need that are just taking up space? Selling them gives you immediate cash, and you should consider placing a significant number of such goods up for auction if you have many.

There are auction houses dedicated to business-related items. Alternatively, you can sell stuff on online auction stores or retailers.

7.  Make a plan
If you don’t use company financial data and insights to develop an actionable plan for your firm, then you won’t be to plan a business strategy.

Your financial data should clearly define your expansion, marketing, and other techniques.

You’ll be able to see whether you’re on track with your company’s financial goals if you track this data monthly, quarterly, and yearly.

Most significantly, this level of planning and knowledge will assist you in developing realistic budgets for each of your business’s departments. It can help you avoid overspending while identifying where you can save money.

For example, if a print advertising campaign costs more than SEO but brings in substantially fewer clients, you may be financially better off if you eliminate that expense. You will be financially secure if you use reliable data to guide your business decisions.

8.  Consider investment:
When you’re on a tight budget and trying to improve it, you have to be very careful with your spending, but you also have to invest something to generate more money.

Real estate investing can be beneficial because, while its value fluctuates, it always has some value. So, the key to getting the most out of a deal like this is patience and waiting for the perfect opportunity.

Another crucial consideration is location, and in this situation, you should consider purchasing a property abroad to rent and then either sell or start a branch of your firm after your finances have been stable.

You can also take advice from experienced local specialists. They will teach you about different types of ownership, the regulations, and the responsibility of your chosen market.

9.  Apply for business financing
Qualifying for a business loan can help you get much-needed cash and enhance your company’s financial health. If your company credit isn’t established yet and your growth rate makes your bank uncomfortable, or if you want to avoid debt, explore invoice factoring.

You’ll be better positioned to negotiate terms from institutional sources if you can gather some money on your own, perhaps from savings, family or friends.

10. Expand your customer base
It is evident that the more clients you have, the more money you will make. Although this is generally true, what is difficult in this situation is the way you will take to increase your consumer base.

For starters, you must understand how to keep your present clients, as customer retention is critical to growing your customer base.

In terms of attracting new clients, you can invest in various marketing strategies to assist your business in achieving greater awareness and, as a result, more traffic.

What matters is that you strike a balance between the money you put in and the money you intend to make by attracting additional clients.

As a result, combining current consumers with word-of-mouth marketing is an efficient and cost-effective way to boost brand awareness and engage new customers.

11. Boost the conversion rate
Increasing your website’s traffic is a good start, but it’s not enough. If your bounce rate is high, you should investigate the issue and make changes to convert those visitors into paying clients.

So, you should be aiming at techniques to improve the conversion rate without spending a fortune to achieve that.

For example, CTAs (calls to action) are an excellent tool for getting customers to buy a product instead of just reading about it. Many individuals have developed a fear of losing out in this digital era. Thus, appealing CTAs that promise discounts for a limited period can easily lead to a purchase spike.

Naturally, you would have to find the right words and make it all visually pleasing, but this strategy doesn’t cost much and can be pretty lucrative.

Hire an Accountants

Final thoughts

Improving your company’s financial position should be a key business plan component.

Follow our steps to improve your financial position and cash flow.

You are not required to complete all the steps or do so in any specific order. Choose the ones that best fit your company’s needs.

Improving your financial performance will extend your business activities, increasing revenue and making it a profitable enterprise.

It will also help protect, develop, use resources, push and maintain economic growth and manage all company’s resources effectively and efficiently.

Experlu Editorial Team
The editorial team at Experlu is comprised of seasoned financial professionals dedicated to providing high-quality content on accounting and finance. With a wealth of experience and diverse expertise, the team produces insightful articles that have established the Experlu blog as the UK's leading financial and accounting resource. The team includes accountants, auditors, and business advisors who stay updated with the latest industry developments. Their commitment to excellence ensures that Experlu remains a trusted source of information, helping readers stay informed about audit, business, finance, and tax matters.