Around the country, many small businesses are feeling the burden of inflation. Increased costs on everything from raw supplies and shipping to labor and utilities are cutting into the already razor-thin margins that many of them operate with. Add to this the threat of a looming recession and other macroeconomic headwinds, and it’s easy to see why entrepreneurs are looking for ways to shore up their finances and save money.
Recently, I joined Intuit QuickBooks, specifically because I wanted to help small businesses better manage their finances amid these challenges. Based on what I’ve seen, the good news is that despite these challenges, there are many ways that businesses can improve holistic cash flow — often with some easy operational changes and simple-to-use tools and platforms.
Here are three strategies for shoring up finances that I recommend to entrepreneurs to best position themselves for success.
Related: How Great Entrepreneurs Find Ways to Win During Economic Downturns
1. Assess your inventory
One of the first things I recommend for product-based businesses looking to improve their finances is to critically analyze your sales and inventory to better understand your customer base as well as what’s driving expenses and profits.
For example, soon after joining QuickBooks, I heard the story of our customer, Jessica Spaulding, the founder of Harlem Chocolate Factory. While many of us may not realize it, chocolate is both a capital- and time-intensive business, with high overhead in the form of quality, fair trade ingredients and talented chocolatiers who develop recipes and even individual treats by hand. Soaring prices of raw ingredients as well as supply chain issues threatened to disrupt the business Spaulding worked so hard to build — a message many small business owners can relate to.
To combat this and move forward strategically, Spaulding took a step back and looked at what her books were telling her. What products were selling the most? What wasn’t selling? Using these insights, she redirected her team to be laser-focused on the products and flavors that were driving the most business and profit. She was also able to decrease her overhead in the short term, as she cut back on the ingredients needed to create less popular flavors.
As I mentioned, closely examining your inventory and sales history is something that all product-based businesses can do. Use your bookkeeping solution to analyze the sales of individual SKUs and look for any trends in your sales — whether it be seasonal, channel-based, location-based or influenced by another factor. You can also work with your accountant or bookkeeper to better understand where you may be able to trim costs or double down to boost profits. Finally, once you’re armed with these insights, put them into action like Spaulding did — honing in on the products that are resonating most with customers.
Related: 6 Key Tips for Leading Transparently in Economic Uncertainty
2. Secure working capital
It’s often been said that it “takes money to make money.” The more I talk to entrepreneurs, the more I think that’s true. The importance of working capital for businesses that are growing or getting off the ground cannot be understated. Unfortunately, the traditional lending system — with long, drawn-out processes and an emphasis on past business credit — is not designed to support many fledgling businesses.
The good news is that now more than ever there are alternatives for business owners to explore when it comes to securing funding. One option is crowdfunding through websites like GoFundMe and Kickstarter, which allow businesses to launch digital fundraisers. Peer-to-peer or marketplace lending via platforms like Lending Club or Prosper that connect borrowers and lenders online are another avenue to explore. There’s also a multitude of small business grants out there — from federal and regional-based programs, those sponsored by corporations, or some specifically designed for members of certain communities like veterans or women. Be sure to store your applications in a Word or Google document to reference later, rather than just submitting via the online form. This will save you some leg work when filling out future applications.
Another path I learned about recently was that of QuickBooks customer, Grace+Love Candle Co., who secured funding through us when they were originally denied by traditional banks. Unlike a bank loan, QuickBooks Capital doesn’t require an extensive application process. Rather, it determines creditworthiness by analyzing the company’s history as shown by the data in their books.
The most important thing to remember when working to secure capital is not to get discouraged. While you may hear many “nos,” during your journey, it only takes one “yes,” — and as I’ve outlined, there are a myriad of different options available to explore.
Related: 3 Steps to Effectively Lead Through Uncertain Financial Times or Company Restructuring
3. Speed up and diversify payments
Now more than ever, consumers (and even businesses) expect to be able to pay seamlessly in a variety of ways — from credit cards to PayPal, Venmo, ACH and more. This means businesses need to embrace and diversify integrated payment systems, allowing customers to pay across multiple channels (i.e. mobile, online, etc.) and accept multiple forms of payment. In addition to meeting customer expectations and helping to increase sales conversion, digital payments also mean money hits a business’s bank account faster.
While it may not seem significant, the impact of real-time payments can be tremendous. For example, instant payments — rather than a delay of a few days — may help a small business owner who needs to make payroll, pay rent or place an order for supplies. Take a look at how quickly your payments are currently processed. If it’s longer than a day, there are likely options you can look into that are faster.
Entrepreneurs have shown their resiliency in spades the past several years. While we may be entering a difficult economic climate, I have no doubt they will continue to overcome these challenges. The more small businesses can do now to shore up their finances — from strategically evaluating their inventory and analyzing sales to understanding the funding sources available and embracing integrated payments, the better positioned they’ll be in to succeed despite looming challenges.
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