5 tips to help your business maintain financial stability

29 March, 2023

Running a business is not easy. As a business owner, you will face several challenges while performing your day-to-day business operations. One of them is maintaining financial stability. A substantial cash flow is required at every stage of a business. Without this, you could struggle to raise working capital, or worse, see your business go bankrupt.

Every business owner focuses on one thing – revenue. However, it’s crucial to understand that revenue comes with spending, and spending always comes with the risk that a business will go overboard and disrupt its financial stability. So let us look at some of the ways small business owners can maintain financial stability and avoid bankruptcy.

Do not borrow too much or too little

Adequate working capital is the lifeblood of any business. It would help if you had working capital to maintain your day-to-day business operations, such as purchasing raw materials, paying wages to your employees, fulfilling supply-chain gaps, upgrading your business equipment and infrastructure, and so on. The best way to access working capital is by taking a Business Loan.

Borrowing the right amount is crucial for the financial stability of your business. If you borrow more than what is required, you will end up paying higher EMIs every month, which puts an unnecessary burden on your business finances. If you borrow too little, you may not be able to conduct your business operations smoothly and harm your reputation. So, consider your requirements and other factors while applying for a Business Loan. Remember not to borrow too much or too little.

If you are looking for a Business Loan, HDFC Bank offers Business Loans at competitive rates to help your business grow. Click here to know more.

Give due consideration to cashflow and money collection

It is quite appropriate to take a Business Loan from time to time to meet your cash flow needs. However, it’s important to understand that a Business Loan is a debt, and one should take on debt only when there’s no other way to bridge the cash flow requirements of a business.

Ideally, try to ‘money-roll’ as much as possible. This involves timely money collection from your customers. If you have sold goods or services on credit, remember to send reminders to your customers for payment. This will help you meet your business cash flow requirements without falling into a debt trap.

Make sure there are no outstanding dues

Collecting payments from your customers on time is crucial, but it’s equally important to settle your payments on time. There should be no outstanding due from your side. So pay all your vendors, suppliers, and employees, and settle your Business Loan EMIs on time.

There are several benefits of doing this:

1. It enhances your business reputation and credit score.

2. You will be able to keep track of your financial transactions and profits in a better way.

3. You and your employees will be able to work with complete peace of mind.
   
   

Create a budget and avoid unnecessary expenses

This is critical for maintaining the financial stability of your business. While preparing your business budget, make sure to include all necessary spending – office rent, employee salaries, electricity bills, computer and internet charges, cost of inventory, etc. Making a budget and strictly adhering to it will help you cut unnecessary expenses. Ultimately, this will lead to greater profits and enhanced financial stability for your business.

Research your financial needs and act appropriately

Different businesses will have different financial needs. For example, some businesses may need to pay advance money to vendors while others run their business on a credit facility. Similarly, some businesses may need large working capital during certain seasons while others require a steady cash flow throughout the year.

So, you will need to understand the financial requirements of your business carefully and opt for an appropriate financial instrument that meets your requirements. Banks provide various financial tools to help businesses, such as Business Loans, overdraft facilities, and business insurance policies.

You could also invest in some essential business tools such as accounting software, payroll management services, expense tracking, budgeting tools, inventory tracking, tax management, etc.

We hope these tips will help you run your company efficiently. You can also consult professional business advisors and financial planners to ensure the smooth functioning of your business. Whatever your decision, do keep in mind its long-term impact on your venture.

Looking to apply for Business Loan? Click here.

To know Why Financial Planning is Important for your Business, Click here.

​​​​​​​*HDFC Bank recognises the challenges entrepreneurs face while acquiring capital. Thus, HDFC Bank has created MyBusiness, a one-stop solution that gives you easy access to loans, digital solutions and provides you with the essential knowledge you need to run your business. With HDFC Bank MyBusiness, you can scale up, expand your operations, and nurture your business.