Top Financial Challenges for Small Businesses

You’ve worked with many small businesses from Liverpool to Manchester to Leeds, as a financial consultant. You’ve guided them throughout their birthing pains from how to handle the petty cash, to set up an entire business management system, including the use of tools like Xero Accountants.

Hurdling the initial few months of operation and getting things in order are probably manageable. The excitement of starting up still permeates the office environment. Financial challenges begin appearing after a year or so of operation. The reasons for these challenges include the inability to meet demand from customers due to cashflow issues. How should companies deal with financial difficulties following the successful launch of their companies?

Here are some ideas:

Understanding Why Small Businesses Fail

At the top of this list, is the lack of capital. Businesses fold because there isn’t enough capital to sustain operations. Business owners have the foresight to plan for operational expenses like salaries, inventory and overhead costs, but fail miserably in the effort to bring revenue.

Management’s failure is also part of the reasons why nearly 80% of small business startups do not make it into their second year.

Cash Flow Problems

The first year will look fine. The operation goes on because you’ve probably raised enough capital to keep you afloat. But toward the end of the first year, you struggle to pay suppliers. The sales projection, as indicated in the business plan, is not materializing. Your sales dip and the vicious cycle of cash flow problem happens.

One approach you can try is some creative gymnastics between when you pay our suppliers and when your customers pay you. Simply put, ask your suppliers if you can pay their invoice, for example, within 30 days instead of 20 days. Similarly, reduce your terms of payment for your customers to 15 days.

Also, decide what you can put off from the expense item you have already budgeted. Sure, it’s essential to pay the Facebook ads to market your brand, but that is still an expense.

Dealing with Taxes

You need to set aside an amount for your taxes consciously. Some businesses forget that they need to pay taxes every quarter or they dip into their funds allocated for tax purposes. The result? Cash flow chaos.

Learn all the relevant tax schedules that you need to be on top of.

Business owner

Increasing Costs

Prices of commodities, raw material, and services will continue to grow. Bring down your cost of goods by looking for suppliers that can provide significant discounts, for example, when buying bulk. Try to manage the payment schedule with them, as discussed earlier.

Creative Marketing

“I thought we’re supposed to hold off on paying Facebook ads?” Yes, but it doesn’t mean you should stop finding innovative ways to drive traffic to your website. There are DIY materials online and on YouTube, which can help you create content, like blog posts or videos, that are more SEO friendly. These are things that you can do internally without any additional costs, except the time and effort by a member or members of your team.

Overcoming financial challenges for small businesses is tough. Creativity is necessary as you try to manage the inflow and outflow of your funds.

Scroll to Top