Talking Cents

Is Financial Mismanagement One of the Reasons Small Businesses Fail?

Almost every business starts as a small firm. And as you may have already heard somewhere, more than 90% of small businesses might fail. This is a staggering proportion of so many dreams crashing on the floor. So here we are to point out one of the major issues that small businesses face. There can be many reasons for the failure of a business. However, one of the worst ones is Financial Mismanagement.

Financial Mismanagement is a scenario in which businesses cannot maintain a healthy cash flow, prepare themselves for low-income months or waste resources that eventually end up wasting money. You must do everything in your control not to let this happen. Here is why.

Managing Finances is not rocket science. Even in scenarios where you have a cash crunch, there are many ways, such as downsizing, loan applications, and tax deductions, to help you eventually get out of monetary restrictions and grow as a company.

Here are some ways that an Accountant can help with Financial Mismanagement:

Cash Flow Analysis and Budgeting

A small business accountant can help in making sure that there is a smooth cash flow throughout the year. Another thing that an accountant can do is help you with budgeting. With a cash flow analysis and forecast, along with budgeting, you will have a clear picture of your finances at the least. This will help you in your decision-making. An accountant can also work through your payment schedules in order to have better cash flow, especially during low-income months.

Resource Management

Sometimes, certain practices are done out of habit rather than relevance. These habits can contribute to poor resource management and, in turn, poor finances. A capable accountant will make certain suggestions to ensure this does not continue. These suggestions can range from warehouse management to vendor payment scheduling to downsizing the staff.

Low Revenue Predictions

Some businesses perform much better in certain months of the year. In such a situation, it is crucial to predict the cash flow for low revenue periods and how to prepare well for it.

Loan Requirements

In many small businesses, there are many areas that need attention. And these areas can use a good stimulus in the form of a loan. A loan is only feasible if the benefit of taking it is much greater than the interest that you would be paying on the amount. Therefore, an accountant is your best bet to decide whether you need a loan and if there are other alternatives for your small business requirements.

Consider M.A.S. for your small business accounting needs

Your small business needs a support system to remain unshaken even in bad weather, such as tax season, recession, low revenue months, etc. For small business accounting in Sydney, contact us by clicking here.