If you are looking to go into business, you will likely find yourself juggling a lot of moving parts. One of the most important elements here is business finances.
How you manage your money will be a major determinant of how successful your business will be.
This means being aware of the risks involved at all times and making timely and smart decisions.
Here are some things to do to protect your business finances.
1. Pay Attention to Data Security
Data is the core of most business functions today. Unfortunately, it is prone to theft.
2019 alone saw as many as 205,280 ransomware attacks. While many small business owners feel like their entities are too small “for the cybercriminals to bother about them” nothing is farther from the truth.
According to a Verizon report, 43% of cyber attacks target small enterprises. Unfortunately, 60% of these businesses close their doors within six months after a data breach.
When a data breach like a ransomware attack happens, you will have two options. The first is to pay the ransom and possibly injure your business finances. The second is to refuse to pay and risk having your information leaked to the public, much to your brand’s detriment.
The solution is to have proper data security measures. These include protecting your Wi-Fi network, installing firewalls, putting in place strong passwords, and encrypting and backing up data.
It is also important to have a plan that outlines the protocol to be followed in case you suffer a breach in spite of your best efforts.
2. Consider Liability Insurance
Ranking 5th out of the ten most litigious countries, the U.S has become extremely litigious in recent years.
Lawsuits are costly, time-consuming endeavors that can severely dent your brand, disrupt business productivity, and, worse, bankrupt it.
Liability coverage protects your business against claims resulting from injuries or damage to property in the instance that you may be to blame.
It is, therefore, not hard to see why liability coverage is a must-have.
In any case, most jurisdictions demand some form of liability cover such as worker’s compensation insurance.
3. Avoid the Costs Associated with Non-Compliance
There are certain legal requirements that a business must comply with. These include labor laws, OSHA standards, tax laws, and so on.
Most states have set fines and penalties for businesses that fail to comply. Some of these can be quite punitive and can place your business at risk of bankruptcy.
As such, it might be necessary to hire competent people to track and ensure compliance.
If you do not have the resources to hire professionals to assist with this, it might help to learn some basics and do it yourself.
While tax law might be a bit complicated if you do not have an accounting background, health and safety might be more manageable.
There are great free and paid health and safety course options for you to consider.
4. Explore other Financing Options
You will soon find out that making sales and having cash at hand are not synonymous. Clients might not pay up on time, and you might find yourself short of cash.
However, you do not need to take on credit card debt and bank loans whenever you are short of cash as these can be expensive.
While it might be necessary to do so once in a while, consider other options such as receivables factoring. If you invoice more than you collect cash, this is one way to ensure you have operational cash.
Over and above, providing excellent customer service, leading thoughtful marketing campaigns, and maintaining stellar supplier relations, how good you are with your finances will be the ultimate determiner of how successful your business will be.
These tips can be a starting point for building a financially sound business that can stand the test of time.