India’s economy relies largely on the performance of its micro, small and medium industries. With 0.33 million micro-enterprises, this sector is one of the largest and most significant.
In FY20, the number of registered MSMEs surged by a whopping 18.49% in India. With this rapid surge of new enterprises, the current focus is solely on acquiring sufficient business finance for companies when the need arises. Maintaining a healthy financial state is simple, provided the company owners are familiar with the art of business finance management.
How to ensure impeccable finances for your business
One must follow the tips mentioned below to attain stability in their business finance.
1. Pay yourself a salary
A business owner may have this preconceived notion that he/she can afford to integrate the entirety of earnings into the business. While one may think that doing so will help bolster working capital, it can also compromise your personal finances. Instability in your own financial condition can spill over to your business as well. Therefore, you must compensate yourself timely as well.
2. Invest in the future
Several small businesses fail because they cannot adapt to changing market demands and trends. Most such companies are content to let things remain unchanged.
However, to ensure a secure financial background, one must also invest in the pursuit of growth opportunities. You can identify a market with potential and use some of your business earnings to acquire a stake in the same. This will ultimately help your company thrive in the long-term.
3. Control travel expenses
Travelling is an integral part of most businesses. Nevertheless, spending exorbitant sums on flights and hotel bookings can quickly affect your overall enterprise’s finances. While you cannot cease travelling completely, putting a cap on such expenses should help you reduce the cost of travelling for business. Always remember that you can cut costs without affecting your business’s growth potential.
4. Never buy when you can rent
A small business, especially one in manufacturing, relies greatly on a number of equipment and machinery. Buying all the pieces of equipment is a costly option that few small companies can bear. This is why you must decide on whether to lease or buy manufacturing business equipment.
The key to perfect business finance is to buy machinery only if you have no option of renting the same. Moreover, renting makes perfect sense when it comes to equipment, which is necessary periodically and not throughout the year.
5. Avail loans when your business is performing well
Most small businesses tend to avail working capital loans only when they face a sudden shortfall or emergency. This is not the best approach since you are already in a financial fix when you are availing the loan. Instead, you can avail a line of credit for your business when things seem to be sailing smoothly, which should make repayments easier.
Always choose a reputed lender for these credits. Bajaj Finserv is one such NBFC, providing Business Loans to eligible enterprises. With minimal documentation and fast approvals, this financial institution is a reliable source for all your business expenses.
It also provides pre-approved offers to simplify and hasten the loan application. These offers are available on several financial products, including personal loans and business loans. You can check your pre-approved offers by providing your phone number and full name.
6. Be smart about expansions
With every business, there comes a time for expansion of operations. When such a time comes, one must seize the opportunity. Still, never go about this blindly. Ensure you perform the necessary research and analysis of the expansion plan.
The most important thing that you must consider is the return on investment or ROI of the expansion in question. Go forward with it only if you assess that the ROI is justifiable. Doing so should keep your capital finance condition stable.
7. Monitor your books periodically
Even if you have a professional bookkeeper to maintain financial records, it is always wise to go through the books yourself. Apart from spotting any errors or miscalculations, this practice should familiarise you with the current financial situation of the business, allowing you to plan and decide more effectively.
Nonetheless, even after following the tips mentioned here, working capital finance is necessary for most small businesses. While your company may require assistance from time to time, the above tips ensure that you are always able to sustain profitability for the business, even in difficult times.
