What business leaders should know about to achieve their financial goals
As a current or future business leader, you should always be aware of your company’s financial goals and what it takes to achieve them. With careful planning and attentive monitoring, you will have an easier time staying on top of your company’s finances and avoiding money troubles. As you work toward reaching your business’s financial milestones and setting new goals, you should keep the following points in mind.
Key performance indicators
Various key performance indicators (KPIs) can be used to monitor a business’s long-term performance and financial wellbeing. The information that is learned from KPIs can also be used to make any necessary adjustments to the business operation.
You can use KPIs to help you set specific financial-related tasks for your staff to focus on in the foreseeable future. By focusing on these tasks, everyone in the company can work to maximize profits while limiting financial waste more efficiently. KPIs can also be used to hold certain staff members or departments accountable if financial goals have not been met.
Special software is often used to manage KPIs and can keep track of analytics and other reporting features that can be reviewed in real time. Today’s technology can be used to create virtual balance sheets, income statements and annual reports that can be reviewed to gauge the effectiveness of each financial strategy.
The importance of emergency funds
You never know when your business might run into financial trouble, and having access to emergency funds could play a crucial role in saving your business from closure. Even major companies that seem to have endless streams of income could find themselves in deficit because of downward market trends or other factors. It is important to find sources that you can draw money from in times of financial hardship.
One of the best ways to get emergency funds is by establishing good relationships with lenders. If lenders offer you money to start a company or pay for other business expenses, you should try to pay off the loans as quickly as possible and adhere to all loan terms so that these lenders will be inclined to loan you more money in the future if you need emergency funding.
If your business is affected by a flood, an earthquake or another major disaster, you might qualify for a government loan that can help minimize the financial impact on your company. Low-interest disaster loans that are provided by the US Small Business Administration have helped many smaller companies through tough times. Other government programs have provided loans and tax credits to businesses that were impacted by the COVID-19 pandemic, and similar programs will likely be made available if another major pandemic occurs.
As dire as your situation might be during times of financial hardship, you should also try to avoid getting money from sources that can set your business back even more financially. Credit card advances can offer you quick cash for your business, but the advance fees and high interest rates could put you in an even bigger financial hole. Taking money from predatory lenders and merchant cash advances should also be avoided if possible.
Having the right training and skills can help you prepare better for any financial setbacks that your business might encounter. You can draw upon your education to make better plans for how you will get emergency funds and how to avoid money pitfalls in the first place. A comprehensive SBU online MBA program can sharpen your decision-making skills and broaden your perspective to help you deal with financial setbacks easier.
Business taxes also make up a large portion of business financial matters. Like individuals, businesses are expected to pay taxes on their earned income. Businesses must also pay sales and property taxes along with state and city taxes in some cases. If you have employees, Social Security and Medicare taxes are also owed.
To ensure that all your business taxes are paid accurately and on time, you should either have an accountant on your staff or work with an outside accounting agency to manage your taxes. An accounting professional can also save your business from overpaying on taxes and may even find tax credits and deductions that can save your company money.
You may be surprised to learn how many credits and deductions can be claimed on your taxes to reduce the amount that your business owes to the government. Businesses can often claim tax credits and deductions for expenses such as:
- Business insurance
- Company vehicles
- Employee benefits
- Office equipment
- Rent payments
- Business trips
If you manage a larger company, you can still take advantage of certain tax breaks. Big businesses often save money by claiming deductions for research and maintenance projects along with employee stock options. The depreciated values of commercial buildings and equipment also sometimes count as tax write-offs for businesses.
The people who work for you can help your business make money, but staffing issues could also set back your business financially. You should have enough staff members to fill positions that are needed for your company to operate efficiently and generate as much business income as possible.
However, you could also be wasting money by having too many employees on your team. Your company might be overstaffed by as much as 30%, which could also have a detrimental effect on production. Employees may be more inclined to engage on social media or do other personal things at work instead of completing important business tasks if your business is overstaffed. Workplace gossip and arguments between coworkers may also be rife because of overstaffing, and this could hurt your company even more. To address overstaffing so that you can save your business money, you may need to consider downsizing certain departments and laying off some employees.
The question of how many full-time employees are needed is another staffing issue to consider. Full-time employees are often required to complete many business tasks, but part-time employees may be able to fill certain positions and save your business money if you can pay these staff members smaller salaries. Also, you might not have to pay part-time employees benefits such as health insurance and paid sick leave.
You should also think about the possible advantages of hiring temporary employees or independent contractors to take on certain roles. These particular workers can be hired to work on special projects or during the busiest times of the year. One of the main advantages of hiring temporary employees or independent contractors is that you only have to pay them to work for a short period instead of hiring them as full-time employees, and will likely not have to offer them employee benefits.
Customer acquisition and retention
The customer is often considered to be the most important part of a business, and how you obtain and retain customers can make the difference between whether your company succeeds or fails. Without a strong customer acquisition and retention plan, your business is more likely to generate less profit and fail.
A good marketing campaign is part of every business’s customer acquisition strategy, and a designated marketing budget is always a wise investment. Money should be set aside for commercial and marketing video production and also for fliers, signage and other materials that help spread the word about your company.
Promotions are often effective in attracting people who might turn into new customers. Even though it might seem like a profit loss to offer products and services at discount prices, the return in new customers who may become loyal followers of your brand might pay off for your company.
Internet marketing is another advertising expense that businesses must plan for if they want to be successful in the modern world. Money should be spent on search engine optimization (SEO) campaigns, pay-per-click (PPC) advertising and content marketing to try to stand out online. Affiliate marketing, which pays affiliates commissions on sales they made on behalf of a business, can also help your company increase its earnings.
If the money to market your business is a concern, there are always ways to advertise for free or at a lower cost. You might not have to spend as much money on marketing if you try methods such as:
- Posting on free social media accounts
- Sending email newsletters
- Starting a customer referral program
- Guerrilla marketing
You should also invest the effort and money into finding ways to keep your existing customers happy so that they will want to continue doing business with you. Customer loyalty programs, which reward loyal customers with special perks, are popular among many businesses. If you send physical products to customers, money can be invested into getting deliveries to customers faster.
Equipment and office supply budgets
Without the proper equipment and office supplies, employees are unable to do their jobs and generate profits for the company to the fullest. As important as it is to budget for equipment and supplies, you should try to avoid overspending on these items to keep your business from overpaying on surplus or unnecessary products.
Desks, office chairs and filing cabinets are always important items to have, and you may need to invest in getting newer editions of these products if your current pieces are no longer up to standard. Paper, pens and other office supplies should also be factored into your business expenses.
In addition to standard office equipment, you may need to invest in more advanced items to keep up with competing companies. Buying the newest computers with advanced capabilities can help speed up many processes and offer more efficient ways to communicate. The latest copiers and printers may have faster output speeds and allow your staff to complete certain tasks quicker.
If you want to save money on equipment and supplies, buying high-quality used or refurbished items may be viable. Many of the best used and refurbished pieces can still work just as well as their newer counterparts and be purchased for less. Some of these products may even still be covered under warranty to give you additional assurance.
The importance of security
Whether you oversee an office building, a manufacturing plant or some other type of business setting, investing in security can help protect your assets. Thieves, hackers and other criminals could cost your business a lot of money if they steal or damage merchandise or illicitly obtain confidential details about your business or customers. Dishonest or disgruntled employees can also harm your business financially, and good security can help prevent this problem.
Physical security has always been a crucial component of the safety of any business, and a state-of-the-art security system can monitor your premises day and night and alert you if any unauthorized people come onto your property. A good security system can also monitor employees’ productivity and other actions so that you can know if certain staff members are unnecessarily costing your business money. If your business deals with cash or other highly valuable goods regularly, then hiring security staff may be a wise investment.
The investment in reliable cyber security is also needed to keep online information and data stored on computers safe. The cyber security software that you use should be able to filter out the latest computer viruses, spyware and other forms of malware to keep your company’s data from being compromised. Artificial intelligence (AI), augmented reality (AR) and virtual reality (VR) are some of the technological advances that can improve cyber security even more.
Keeping your business afloat
Staying in business is often difficult enough, and managing your money the smartest way can help you focus on other objectives that must be met to make your company a valuable player in the market. Successful business leaders never overlook their budgetary obligations and the importance of steady cashflow, and you can stay in the same ranks as these professionals by being smart with your money.