How to Have Long-Term Financial Stability for Your Business
Audio version available here:
Length: approx. 1 min. 45 sec.
With half of small businesses failing within five years, achieving long-term stability is a vital goal for every business no matter which stage you’re in. What are the reasons businesses are unable to stay financially stable in the long-term? How can you ensure your business won’t fall victim to the statistics?
Recent data shows that “poor cash flow management” is the biggest reason why over 80% of businesses fail. Most businesses focus too heavily on the short term. Rather than just focusing on immediate cash flow, a “long-term cash planning strategy” will help you maintain your business’s long-term financial stability.
Having a cash reserve for emergencies is a huge part of achieving financial stability. Experts recommend that businesses have enough cash “to cover three to six months of operating expenses”. Unexpected events can happen to your business, so it is essential to have money ready to combat these situations.
With an ever changing technological and consumer environment, it is important to understand how these variables “affect [your] business’s ability to generate revenue”. Consider diversifying the company’s revenue streams to combat potential decreases in revenue as the world changes.
Finally, as your business grows, so do operating expenses. Be sure to monitor those expenses to ensure they are not “overinflated” and find ways to “optimize operating costs”. By doing so, your business’s bottom line remains healthy and your cash flow positive.
It is important to understand that sustained cash planning involves constant monitoring and planning. But you’ll fall behind if you do not also engage in proactive tax planning. After all, taxes are inevitable. Luckily, tax planning is XQ CPA’s specialty. Check out our e-book How to Grow Your Wealth Through Tax Planning to get started on your tax planning journey. For personalized tax advice, make an appointment with our experienced tax professionals today.
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