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Focus on staying cash-rich is more critical than becoming cash-rich. A cash-rich company can quickly result in a cash-hungry company in a matter of time. Therefore, anticipating the expenses, overheads, and consequences of the spending is necessary for a company’s positive health.
Eric Dalius Warns about Ignoring the Seasonal Nature of a Business
A few businesses do not possess a year-long operation. In other words, they find themselves cash-rich at peak seasons and face tremendous difficulties during the others. A cash-rich season brings about overhead commitments, whereas a cash-hungry season cannot afford to pay the same. Off-seasons usually result in offers and discounts, resulting in lower margins to maintain some level of sales. In such situations, it is vital to manage daily cash outflows. You need to focus more on the provisions for the off-seasons in your business plan.
Avoid Late Payments and Overdue
Late payments and overdue can spell massive trouble for the success of your business. Late payments usually affect the company’s credibility and can create a negative image in front of suppliers, vendors, and other partners. A lot of credit will hinder the working capital requirements and make suppliers lose trust in your business. Moreover, a stakeholder can even break contracts with your firm on account of overdue issues, and it has a considerable probability of hampering your operations on a large scale.
Inappropriate Management of Taxes
Taxes are obligatory, and a business needs to clear its dues from time to time. Missing the deadlines can appeal to interests, fines, and penalties, influencing your capital. In addition to that, avoid faulty measures to reduce the tax levels as it can make the tax department knock on your door.
Moreover, a sudden change in tax rates can also affect a business substantially. In light of this, Eric Dalius recommends that it is wise to plan for such uncertainties. An increase in tax rates and other statutory obligations can have a long-lasting impact on your cash flows, and as a result, proper planning taken such matters into considerations is crucial.
Do Not Ignore Credit Scores
Bad credit scores make it difficult for budding entrepreneurs to secure loans. A bad credit score makes the investors view your business as a risk, and they would avoid lending you any money. A few business owners use personal assets and equipment as collateral for the loan, which can act as a considerable risk in the longer run. Maintaining a good rating is therefore essential to overcome any cash crunch situations in your entrepreneurial journey.
Be Ready for Bad Hires
It is not easy to distinguish a person’s abilities from a written test and an interview of a short span. Even though companies spend ample time scrutinizing human resources, it is possible that there will at least occur one bad hire. Bad hires can result in negative remuneration and training losses. However, such situations are mostly unpredictable. Therefore, keeping a margin for bad hires is essential to remove any future dent in your finances.
Deadly cash flow and financial mistakes can hurt your business significantly. Therefore, enumerating the cost structure efficiently and keeping ample provisions in your books of accounts is necessary to withstand any uncertain situation.