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Business Growth Tip: Steps to Meeting Your Financial Objectives

Businesses thrive on ideas and organization. But unless their engines are oiled by a constant inflow of funds, they’re not going to achieve much. And if they’re regularly short of cash, it’s a sign that they may be struggling to stay afloat.

So it’s important that companies keep their finances in order. The nature of the cash flow or profit-making challenge they face may vary depending on their particular circumstances, but the onus remains on them to balance their books if they are to remain going concerns.

If you own a business, you’ll want to know how to deal with the occasional money issues you encounter. You may also be concerned about staving off more serious, long-term financial problems, like periodic losses or long-standing debt. In this article, we’ll offer some advice on tackling these issues.

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First, let’s look at the types of financial goals you should be working to achieve for your enterprise.

The Top Financial Goals Your Business Should Be Aiming For

1. Greater Revenues

If you intend to grow your company, you’ll want to boost the revenues you get from sales. In order to get this done, you may want to adopt some strategies to increase your sales numbers, while also maintaining the prices you charge for your products and services (or increasing them if you can).

2. Lower Costs

As you work to improve revenue generation, you should have your eyes on costs as well. Some of your costs will come from the rent, salaries, taxes, acquiring machinery and equipment, etc. Others will crop up on a daily basis, as transport fees, office supplies, and the purchase of raw materials, among others.

3. Regular Cash Flow

There has to be money available to cover daily costs. Ideally, you want cash coming into your business, just as you’re spending it, just so that your finances remain balanced.

4. Higher Profit Margins

Remember, it’s one thing to raise your revenues, and quite another to increase your profits. The difference lies in the margin between your production cost and selling price. You raise profits by increasing your margins.

5. Properly Serviced (and Low) Debts

Sometimes, you’ll have to take a loan from a lender to plug a funding gap. How do you plan your repayment so that it doesn’t become a burden for your enterprise?

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How to Meet Your Financial Objectives

If you’re a business, your financial objectives will be connected in some way to the goals we’ve listed here. So we’ll draw up a stepwise approach to meeting those objectives by thinking about how to achieve the goals we’ve listed.

Know What Your Financial Objectives are and Why You’ve Adopted Them

The ultimate aim of drawing up financial objectives would be to grow your business. But there might be some shorter-term goals you might want to reach with them, like a level of profitability, or a size that’s appropriate to get some kind of benefits. Being clear about why you’ve drawn up your plan should make it easier for you to design a plan of action.

Start Documenting Your Financial Transactions

Or if you’re already doing this, make this process more efficient. Learn about the various bookkeeping practices, financial records, and what they’re for. If you can’t handle them, you may hire an accountant, use accounting software, or outsource to a small business bookkeeping agency.

Use Periodic Budgets

This is another way to plan revenues and streamline spending. There’s a good deal of planning involved with budgeting that you should get a grasp of. For example, you will have to forecast revenues based on what you have managed to rake in in previous periods (say, last three years), market conditions, and your own capacity. And your expected expenditure for the upcoming period may be determined based on the summed costs you’ll incur over the period covered by the budget.

Find Out What Gulps Your Money, and Trim It

Keep a daily record of your expenses, and review it at defined intervals (monthly). Look out for spending that comes up often. If it’s not necessary, you could cut down on it. And if it’s not consequential, you may eliminate it from subsequent expenses.

Strike Better Deals With Vendors

Renegotiate your contracts with your suppliers if there’s room for a more convenient arrangement. Work your payments into your schedule so that it doesn’t soak up the cash you have in hand for other (more pressing) obligations.

Write a Convenient Debt Repayment Plan

As much as it’s within your power, get your creditor to agree on a debt repayment plan that doesn’t overburden your business. Press for a reasonably spread out plan with the number of installments that might suit you.

Increase Your Margins

Perhaps this isn’t something you could do in a heartbeat. But there are a number of ways to raise prices without freaking your customers out. This article gives some good examples.

Ask for Upfront Payment

Ask clients to make partial payments for your services before you deliver them (if this is something that works in your line of business). The funds you collect via this means could help even out cash flow and prevent short term financial problems.   

Feature image source: Botswana Youth Magazine

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Ikenna Nwachukwu holds a bachelor's degree in Economics from the University of Nigeria, Nsukka. He loves to look at the world through multiple lenses- economic, political, religious and philosophical- and to write about what he observes in a witty, yet reflective style.

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