As a business owner, you have to safeguard the quality of your product and your brand image so your clients respect your company and give it as much business as possible. However, behind the scenes, you also have to safeguard your relationships with banks, suppliers, creditors, and others because, without access to their resources, it can be impossible for your business to grow. That’s a multi-part strategy that involves protecting your credit, spending smart, securing your data, and several other elements. Here’s a look at five of the key things you need to do to protect your business finances.
1. Protect Your Liability
The nation has become very litigious, and, as a small-business owner, you cannot take the risk of having someone sue you and force your business to shut. Because of that, you need to be well insured. Almost every business owner needs liability coverage to protect them from injury claims from employees, clients, delivery people, and others who enter the business. Additionally, depending on the scope of your business, you may need commercial vehicle coverage, property insurance, and business crime coverage.
2. Focus on Data Security
In addition to protecting physical assets, you need to focus on data. Data is hugely important to contemporary businesses and leveraging it in careful ways can give you insights into where your business needs improvement, when you should shift your focus, and how you should market to your clients. Regardless of how you use your data, you need to safeguard it. This applies to everything from a client’s credit card number to mailing lists to employee information and intellectual property.
You need security measures in place to protect your Wi-Fi network and your saved information as well. You also need security protocols that dictates who can access what, how, and where. Most importantly, however, you need to plan how you are going to respond to a data breach in terms of minimizing the damage, safeguarding your reputation and assuaging clients.
3. Protect Your Relationships with Suppliers
Whether you are a retailer, a restaurateur, a mechanic, or another type of entrepreneur, you likely obtain products, inventory, parts, or supplies from other companies, and you have to keep these relationships positive. If you fail to pay your suppliers on time and in full, they may eventually sever the relationship and, in some cases, word of your payment habits may spread to other suppliers in the area, making it hard to establish new relationships.
Without suppliers, it’s impossible to keep your business running, so staying on top of these invoices is just as important as paying the light bill, the taxman, or your mortgage loan. In most cases, it is arguably better to go into debt using a bank loan, a merchant cash advance, or even a credit card than it is to miss payments to your suppliers.
4. Reduce Debt with Creative Financing Options
Accruing debt is almost inevitable when you are starting a business and, throughout the life of your business, you will likely need to borrow money multiple times to grow your operation or stay on top of current costs. However, debt can become unwieldy and cumbersome in itself. If you take out too much debt, juggling your repayments can cut into covering your regular expenses, making it hard to run your business.
Because of this, businesses need to keep other options in mind. You don’t simply have to take out a bank loan, use a credit card, or engage with other types of debt. There are alternatives such as receivables factoring, an ideal solution for businesses that tend to invoice a lot of their clients rather than demanding payment upfront.
Receivables factoring turns your accounts receivables into cash. Essentially, you take your stack of invoices and hand them to a factoring company. The factoring company gives you an advance, typically equal to 60 to 80 percent of the cumulative amount due on the invoices. Then, as the invoices are paid, you repay the factoring company the advance as well as a fee equal to 2 to 3 percent of the invoices’ value and you keep the rest. This practice allows businesses to increase their operating capital and meet their current financial demands without taking on any new debt. Rather, they simply leverage their accounts receivables.
5. Safeguard Cash Reserves
Finally, when protecting your business’s finances, you need to protect your cash. In spite of the move toward credit, many consumers still continue to use cash and nearly 40 percent of business transactions are done with cash. Even consumers who prefer credit cards use cash for roughly half of all purchases less than $20.
Unlike electronic payments, cash isn’t hackable, but it can be slipped into a pocket and carried off without a trace. In addition, when your employees carry cash deposits to the bank, they risk being robbed. To protect their cash, many merchants are turning to smart safes.
These safes eliminate accounting errors and streamline back office processes by counting the cash from the cashier’s drawer and preparing the bank deposit. These safes also communicate with the bank, allowing the merchant to get advance credits based on the cash in their safe. When it’s time to move the cash from your business to the bank, an armored car does the work so you don’t have to worry about the safety of you or your employees.
When you own a business, your livelihood is directly tied to your business’s financial health. Failing to protect the financial health of your business can cause the whole enterprise to crumble. When you safeguard that aspect of your business though, you can focus on the rest of your business and move forward confidently and successfully.