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How To Keep Your Business Financially Healthy

In this blog, you will learn about:

  • The role of finances in operating a healthy business
  • How ambitions to scale should be aligned with financial feasibility
  • Why monitoring asset activity is as critical as employee activity
  • The role that lean thinking plays in financial health
  • Arguments for keeping your accounting house, rather than outsourcing

An acute awareness of how to keep your business financially healthy can be the difference between a business that thrives, and a business that simply gets by.

In some cases, it can be the difference between success and failure in business management, too.

When we take into consideration the fact that 66% of small businesses face financial challenges, it has always been a critical focus for entrepreneurs to keep close control of their cash flow. This is particularly true in the early stages of your company’s life cycle. From the perspective of business management, keeping your business financially healthy isn’t just important – it’s a necessity.

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Keeping Your Business Financially Healthy

To keep your business financially healthy, you should consider the following business opportunities:

  • Scale responsibly, and in line with realistic projections
  • Track how you use your assets…or how you don’t use them
  • Apply lean principles to your business operations
  • Keep your accounting in house

Scale Responsibly

Scaling your business will be an ultimate end goal for you – but it’s one that you must incrementally work towards in order to keep your finances under control.

Only 22% of businesses launched between 2011-2021 managed to scale successfully, demonstrating just how difficult it can be to complete correctly.

From a financial perspective, it is vital to only scale for your next target and not your end target. Shooting for the stars too quickly can become a burden on your finances; while you’re busy juggling all the entrepreneurial plates, it’s important only to carry the responsibilities that you can, and not create too many financial obligations which you can’t be confident of fulfilling. 

Remember, quick scaling accounts for 74% of startup failures. This shouldn’t be a source of anxiety, but it should act as a reminder to aim for incremental, rather than the moon.

It is also vital not to overinvest based on predictions and forecasts. Finding the perfect balance between scaling and running before you can walk is critical for future business opportunities.

Overall, there is a clear correlation between scaling too quickly and financial failure. 

Track What Gets Used…And What Doesn’t

As business owners, we can get caught up in believing that the most important thing we pay for is people.

Now, before we continue, clearly your employees are critical to business success. You can’t afford to place the largest portion of your expenditure into something that doesn’t work.

However, this is the same principle for your other assets too. 

To build a business from the ground up, you will need perspective on not just the role of people in your business, but also other assets too. 

This comes in the form of software, premises, 

Employees can be trained, repositioned in roles, promoted, etc. There is an argument that they can move on too, but from a financial perspective you will still be required to plug that resource gap – unless you scale downwards.

If you’re investing in technologies, hardware such as $1,000 laptops, and office premises, it is a sensible business management approach to ensure that it’s contributing in some way to your bottom line.

If it isn’t, it’s time to reevaluate.

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Think Lean

In 2017, PWC completed a consultation report critically analyzing how a modern approach to financial management can translate into improved overall business performance. 

Their report found that finance functions that successfully transform themselves on the back of lean (principles) spend 20 percent more time on insights, and less on data gathering.

That is, finance departments had more time to truly understand what they were spending, how they were spending it, and make sound business decisions on the back of this. 

This requires a fundamental mindset shift in what is a traditionally conservative business department. However, only 24 percent of finance functions are currently spending time doing work that requires strategic thinking – so it can become something that separates you from your competition.

KPMG also noted that embedding lean principles into finance departments provides autonomy towards eliminating non-value adding spend – a similarity in approach to tracking what you use, and what it contributes to your bottom line.

As a minimum, thinking lean in your finance department shifts the focus from overspending for the future, to sensible spending for the present. 

The benefits of a lean mindset are clear in business management.

Keep Your Accounting In House

In the quest for growth, it can be tempting to outsource some of your core functions to the ‘experts’. 

There are plenty of talented teams that can pick up some of your departments, and undoubtedly they will do a great job with the resources available to them. This, too, would leave you with more time to focus on the fundamentals, whilst feeling like things are motoring away in the background. From a business management perspective, it can make sense on the surface.

From a financial perspective, however, you will need more than just a pair of eyes to have a once-over of your profit and loss sheets – particularly if you place a great deal of emphasis on implementing a lean financial culture. 

The reality is, the true functionality of your business is unique, and if you want your finances to be deeply understood in relation to your wider business goals, it would be a sensible move to keep this function in-house and hire a full-time employee.

This is for two reasons, essentially. One, as just mentioned – your business is unique. When you outsource your finance function, can you guarantee that there are eyes over your finances for 40 hours a week? If you want that deep understanding, that’s the time required to dedicate to it.

Two – and this one seems trivial, but think about it – would you rather have your accountant available over the phone, or in the office next door?

Whether it’s for trivial chats, brainstorming, or a number-crunching strategy session, having someone who is keeping track of all spending, for 40 hours a week, around the corner from your desk, could make a real difference in the financial fortunes of your business.

Building A Financially Healthy Business

There are a wide array of business opportunities available to startups when they begin their new venture. Amongst the multitude of directions that your business can head, one thing must always be in your line of vision – your finances.

When it comes to incorporating your business in the UAE, keeping costs down as much as possible will of course be on your mind, and this is something that we at Business Incorporation Zone can assist with.

Our long-standing partnerships with major banks in the region mean we can present you with tailored opportunities for corporate bank account opening, and our in-depth knowledge of both the industry and the region ensures we know exactly what setup package is right for you.

If you’re looking for a helping hand with incorporating your new venture, let’s connect. 

Call us at +97143873401, or fill in our website form and we will call you back within 55 seconds.

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