How Boston Businesses Can Manage their Finances Better
While we regularly spotlight different businesses around Boston, we felt it prudentunder the current circumstances to provide some thoughts on the financial side too. After all, money is the lifeblood of every business and when that dries up, the company is likely to struggle unless the situation rectifies itself.
Here are some thoughts on how the Boston business community can manage financial bumps in the road or handle unpredictable trading seasons.
Flexible Workforce Planning
A flexible workforce is one that is setup to grow and contract depending on the business environment. By designing labor in this manner, a company can deal with sudden changes to revenues without the business expenses dragging them down before their fortunes change.
In most situations, companies have paid to recruit and train staff members, only to lose some of those valued people they’ve invested in during a downturn. Instead, it’s better to create in-house training using video courses and documentation. This way, the company can train up new people quickly without needing to reinvent the wheel or increase their expenses.
With training being an infrequent cost to develop, there’s greater freedom to employ people on a part-time basis, use contract workers and freelance people. This allows the company to adjust the labor costs up and down without causing unnecessary disruption to the business.
Look at the ROI
Knowing the return on investment with different projects is worthwhile. Otherwise, there’s a risk of trying several different ideas, running through available capital, and not finding success.
Smaller companies and especially startups have a limited number of opportunities to get things right. They cannot try everything. Therefore, assess the chances of success for each potential project and narrow the focus to one or two ideas that are the most likely to succeed and where the potential market is big enough to make it worthwhile.
Keep a Tight Rein on the Numbers
Focusing on the numbers behind the business avoids not knowing what is going on. However, this is often a backward-looking viewpoint, so producing management accounting to forecast what is expected to happen is even more useful.
When there’s an expected bump in the road, or just to leave enough dry powder in financial reserves for any surprises, it’s sometimes beneficial to take out a business loan. Some loans are setup to charge interest whereas others use factor rates. The latter is a little bit confusing to people who haven’t heard of them.Essentially, the full cost of the loan is packed into the value of it and the payback amount reflects that. To learn more, checkout the link above.
Avoid Taking on Star Employees
While you may wish to follow the advice to recruit the best people, they are expensive to recruit and offer a good enough salary and benefits package to secure them. They’ll also be interested in advancement, and if the company doesn’t move fast enough, will likely move elsewhere in due course.
It’s better to rely on internal and external training to give existing employees a chance to improve and grow into new roles. This encourages the team to evolve as the business grows. It also avoids having any prima donnas in the office messing with the culture.
Managing the finances of a smaller company better to mitigate any downturns and survive through them is tough. Not every business wins at this attempt, but the ones that do have less competition thereafter.