SMEs account for over 99% of all businesses in the UK, amounting to over 6.0 million businesses employing anywhere from 1 to 250 employees. Of course, with any business comes financial risk. But by following these tips you can help your business reduce these risks.
Financial risk refers to anything that threatens your business’ financial growth and ultimately profitability. There are a number of key areas that can have an impact on an organisations financial risk, and these include: credit, financial regulations, and cash flow.
In order to manage your financial risk, you’ll need to take the time to identify the risks and put into plan steps to limit those risks.
Limit your borrowing
On average, it takes UK startups £5,000 to launch and a further £22,756 in their first year. If you need to start out with a business loan, make it as low as possible and where possible look out for specialist business loans instead of personal loans that are potentially secured against your own assets like your house for example.
To reduce your financial risk, only take out a loan for the amount you need and build in the repayment into your financial forecast.
Introduce an automated payroll system
Introducing an automated payroll system can help you save time and money. Greatly reducing your business’ operating costs an automated payroll system can help improve your bottom line because the information only needs to be input once instead of on a monthly basis.
Not only can it reduce human error, but automated payrolls can make tax calculation easier – making running a business slightly less stressful!
Diversify revenue streams
Diversifying your revenue to include multiple streams of income that don’t just rely on your current business can help provide you with that peace of mind that should your business collapse, you have additional income streams to fall back on.
Create a structured business plan
Creating a financial forecast isn’t something you need to do when you’re setting up your business, it should be something that you do regularly at least every quarter. Take the time working out where your overheads lie and if you’re able to reduce them. Look at your business as a whole and see if you can streamline any processes or add additional products or services.
Choose the right investors
Whether you’re looking for angel investors, silent-partners, or perhaps a takeover, think about the type of investors you want to have on board with your business. The right investor can have a dramatic impact on an organisations success – or failure.
Article by Born Realist