Apart from skilled employees and efficient processes, your financial habits also influence your business’ growth. Since there’s always scope for improvement, we recommend revisiting the way you look at your business’ finances.
Here’s a look at 4 habits to implement so that your financial practices lead to business growth.
1.Review your finances regularly
As a business owner, it is imperative that you perform weekly or monthly financial reviews. This will help you understand the frequency and scale of your operations. It also aids in understanding whether your business is actually growing, or if it is experiencing a temporary phase of profitability. Moreover, a financial review will identify seasons during which your business does well as well as learn more about the lean periods. This will help you plan a growth strategy, improve your marketing activities and make revisions in your payment collections processes.
2.Keep an eye on taxes and liabilities
While your company’s gross profit may seem impressive, it’s important to set aside money for taxes and other liabilities. This will ensure that you know what your net income is, and you will not confuse available income with income locked for tax purposes. Take the time to also explore various tax benefits and see which ones are applicable to you. Tax deductions lower your taxable income, and help you retain a larger chunk of your profits. If your business is new, you can get help from a financial advisor.
3.Establish a list of priorities
For any growing business, there is always a mountain of financial tasks that need to be completed. To maximise your productivity and focus on the important tasks first, define your workload on a daily, weekly and monthly basis. For example, decide beforehand whether you will carry out an analysis of key financial ratios like profitability, debt ratio, and financial autonomy of the business on a particular day. Similarly, categorize your schedule by planning what you are going to do in a given week—like credit management, investment analysis, or budgeting. This will help you organise your efforts and keep track of your progress.
4. Understand your financing options
It is vital to educate yourself about financial sources such as loans, which can come in handy whether you need working capital, want to purchase machinery or put your growth plans into motion. Knowing your loan options is also important for a growing business, in case you need urgent funds during a lean season. Be informed about eligibility criteria of collateral-free business loans and ensure you have a good credit score too. Also understand your various business loan options.
For example, an SME has the following options for business funding:
The most preferred option by small businesses, this loan can be utilized for any and all business expenses. It is collateral-free, carries a high loan amount up to Rs.30 lakh, and provides online account management.
This loan helps you buy, upgrade or repair your business’ equipment and machinery. You may utilise the loan amount for any machinery-related expense.
Working capital loan
This loan is the best option if you require help with financing the day-to-day operations of your business. It can be used to pay bills, employee salaries, and other short-term operational costs.
This option offers you a loan limit for a predetermined duration. This comes in handy when you are unsure of the exact funds you require, or if you need periodic financing, such as for working capital needs. Flexi Loans give you the right to withdraw funds as many times as you like during the tenor and prepay when you have the funds to do so at no extra charge. You need to pay interest only on the amount of funds that you use, and not the entire sum, thus managing your cash flow better. Additionally, your EMIs can consist only of your interest component; you can repay the principal at the end of the tenor. Once you make reviewing your financial status a habit, your enterprise is sure to flourish.