As a small business owner, you have your work cut out for you. Small businesses are a vital component of the economy. They generate tax dollars, employ countless people, innovate, and give big businesses enough competition to keep them on their toes. Unfortunately, most small businesses don’t survive their first few years.
Competition is tough, consumers are in debt, and in its initial years, your new small business is more vulnerable to unforeseen consequences. But by being proactive and taking some important steps, you can improve the chances of your small business surviving its key initial years.
#1 Minimize Expenditures
It’s essential to minimize expenditures while your small business is in its infancy. Make frugality a company policy. Train staff to avoid unnecessary expenses until the company grows.
#2 Keep Financial Channels Open
Many small businesses fail because they don’t have their financing sorted. Your small business may suddenly need funding to help with essential operational costs such as salaries, maintenance, repair, inventory or more. Alternatively, you may need money to take advantage of a lucrative business opportunity or finance an expansion. As a seasonal business, it’s especially important to have money to hire more employees or buy more equipment if the upcoming season offers more prospects.
Develop a good relationship with your bank to get short-term or long-term financing when needed. Try to have collateral, a good credit score, and strong cash flow to improve the status of your loan application.
Remember, banks can take four to eight weeks to approve an application and release the funds. You should also have options for emergencies, such as investors, a line of credit, or bridge funding lenders for a quick injection of cash. But be wary of certain funders that try to trap vulnerable small businesses with predatory conditions. For example, some funders offer unregulated loans with astronomical interest rates that target desperate businesses and hold them in debt traps.
#3 Partner with an Ethical Debt Collection Agency
Due to the state of consumer debt in the country, your small business could run into delinquent accounts. You can improve your accounts receivable turnover ratio by only extending credit to consumers with good credit scores, references, and more.
Other good practices to improve your collections rate is to invoice on time, offer early payment incentives, add late payment fees, and use modern accounting software to send timely reminders. However, you may run into a bad debt despite your best efforts. If your customer is ignoring the reminders you’ve delivered through email, phone, or mail, then contact a debt collection agency quickly.
Statistics suggest that debt grows harder to recover as time passes. Partner with an ethical consumer debt collection agency that boasts a high recovery rate yet treats consumers with dignity and respect for the best results. Not only is hiring an ethical agency good for your karma, but it will protect your reputation and preserve your valuable business relationships. Your current delinquent customer could turn into your best client in the future when treated with diplomacy.
While a small business faces many challenges, financial issues can be the most difficult ones. By minimizing expenses, having funding options, and improving its accounts receivable turnover ratio ̵