When building a business, you probably dream about the day when clients are banging down the doors and vying for your services. The reality is that such rapid business growth isn’t always as delightful as it sounds.
But if you prepare for the growth and manage your finances carefully, you can sustain this growth. Learn some of the strategies to help you do precisely that.
1. Protect yourself from new risks
When you were small, every customer counted. You probably spent considerable energy finding new business, stressed about overdue invoices and even lived through a bit of cash-flow drama every month.
The good news is that a rapidly growing business can think beyond day-to-day survival.
But, there are challenges you shouldn’t overlook:
- There are more clients to manage
- Not all customers will pay you on time
- Bigger clients and projects may mean longer billing cycles
With the right strategies, you can easily resolve these challenges, so they don’t impact your cash flow. Here are several easy-to-implement strategies:
- Do a credit check on new clients so that you know whether they can pay you.
- Implement systems so you can focus on what you do best. Systems that let you:
2. Get smart with your accounting
When you’re small, you may be able to get away with using a manual accounting process. But as you grow, managing invoicing, taxes, and accounting becomes more difficult and time-consuming.
The sheer growth in the number of transactions—and even employees on your payroll—requires that you invest in new accounting systems.
In fact, it’s wise to invest in business accounting software from the start—even before the growth kicks in. Software that:
- Grows with you
- Helps you track the increasing amount of receivables, expenses, and revenue
- Creates reports for you and provides an at-a-glance summary of the company’s financials
3. Have a plan for working capital
Many businesses wrongly assume that if your sales are increasing, your profits will go up, too. But if your costs to get new customers is high, your profit margins may be lower.
You should understand your financials beyond only revenue. Analyze sales, overheads, inventory, assets, liabilities, and your operating costs to understand the health of your business.
Also, make future projections so that you can determine how much working capital you need.
You use working capital to fund your day-to-day operations like payroll and investment in equipment. The higher your operating costs, human capital costs, and infrastructure costs, the more working capital you’ll need to finance growth.
Knowing the challenges is half the battle
Rapid growth is exciting; it’s what you want as a small business owner. But, in periods of rapid business growth, there can be challenges. With the right tools and plans in place, your business will survive and thrive.
This post was originally published on the FreshBooks blog and has been revised for Ideas by We.