The Financial Health of Your Business
As a business owner, you have to be thinking about the short- and long-term financial health of your business. Having a structured plan in place allows you to make the best possible decisions when it comes to your financial success. What are your goals and how are you going to achieve them? Keeping a clear picture is critical in preventing financial hardships and avoiding bankruptcy.
Here are a few principals to help you achieve financial health for your business and avoid bankruptcy:
- Do the Math – Set a Budget
As money comes and goes, it’s best to know the numbers, create goals, and stick to a budget. Crunching the numbers can help you to evaluate realistically where you are and where you are going. Sticking to your budget allows you to keep costs and spending in check. This also helps to minimize excessive spending which is a root cause for debt. Your business will benefit greatly and avoid the need for bankruptcy by financial planning, which includes creating a budget.
2. Build an Emergency Fund
Sometimes circumstance happen that are beyond our control. If there is one thing the COVID-19 pandemic has taught us, it’s that building and maintaining an emergency fund is essential. Not every bankruptcy case is due to excessive spending, incurring debt. If unforeseen circumstances arise, you have the means to protect your business. It’s also important to ONLY use this fund for an emergency, which requires some forward thinking and defining what should be considered an emergency.
3. Needs Vs. Wants
This may sound simple but unless you have an unlimited amount of money pouring into your business it is essential to clearly define the needs of your business vs non-essential spending. Ask yourself, what does your business need to spend money on that are essential. For example, needs can be defined as office supplies, essential equipment (if your field is specialized), etc. Wants for your business is where things get tricky and can cost you long-term. Excessive spending, especially when it’s non-essential spending, is how a business can incur debt quickly. You want to be conscience of return on investment and be mindful on your spending.
4. Update Your Business Plan
As your business’s financial situation changes, be willing to revisit your business plan. Keeping your business plan updated can help you mitigate debt and avoid bankruptcy. The newly reconstructed business plan should include a close look at some of the following areas:
- Your enterprise strategy
- Your sales and marketing strategy
- Your operating plan
- Your capital-expense budget
- Your forecasts and cash flow projections
Restructuring or reorganizing your business positions your business for future success and allows you to take a focused look at your business finances. It is also essential to have an experienced lawyer on your side who can help guide your company through this process.
Our goal at New Beginning Bankruptcy is helping our clients achieve financial freedom. Using these principals can help you avoid bankruptcy and save you money. That is why we help our clients in areas like succession planning. Sometimes it can feel like bankruptcy is unavoidable, however, it is critical to work with a legal team that can guide you step by step in making the right decisions that will improves the overall financial health of your business.
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