When you own a business, it is essential that you do everything you can in order to protect it in every way you can. Although this could mean in terms of the brand image, here we will be looking at what you need to do to protect your finances specifically. So, let’s find out the 3 simple steps that you can take to protect your business financially.
Invest in Credit Insurance
The first thing you can do to protect your business financially is to take out credit insurance. The world of credit insurance is complex, but in a nutshell, credit insurance protects your business against the non-payment of goods or services. For example, if you are a construction business and your team completes the work, but the other company does not pay for that work, credit insurance would mitigate the majority of your losses.
There are so many different types of credit insurance, from whole turnover insurance and single account insurance to domestic and international credit insurance. To make sure that you are getting the best deal and also the right cover, it is best to work with an impartial credit insurance broker. In the future, if you ever need to claim, you will be able to deal directly with the broker rather than having to try and communicate with a string of different customer service people!
Maintain A Strong Relationship With Suppliers
The next thing you can do is to maintain a strong relationship with your suppliers. It is so important to have a healthy and strong relationship with your suppliers, as if you get into a habit of paying suppliers late or being unprofessional, word could spread and you might struggle to establish new relationships with other suppliers in the future if you needed to.
If your business is one that relies on suppliers, your relationship with them should be a priority. Pay your invoices on time and stay in touch, as this could have significant benefits for your company long term. When you are good to them, they are going to want to keep you on board!
Diversify Income Streams
Our last tip to help you protect your business financially is to minimise financial risk by having a diverse range of income streams. Perhaps you have one core stream of income from a huge client. If this client was to ever go bust, this would have an enormous impact on your business and trying to desperately find other clients to replace this business will not be easy. So, it is vital that you have a range of different income streams so that when one is threatened, it won’t be completely disastrous for your business and you can fall back on the other lines of income.
When considering the structure of your business, consider the different revenue streams you might have. For example, as a marketing agency, perhaps you have two large clients who contribute to around half of your income. It would then be advised that you have multiple smaller clients who contribute the other half of your income. If one of your smaller clients leaves, it won’t be the end of the world in terms of cash flow. If one of the bigger clients leaves, it will have more of an impact, but the smaller clients and other large client will support the business.
In the case that all of the clients left (as unlikely as you might think it is), you might have good relationships with other agencies who don’t offer your specialist skill and you can conduct white label work for them.
Making sure that you have a range of revenue streams is essential to protecting your business financially! When this is a priority, you will naturally see business growth.
So, there you have it! When you do these things, although they may require an upfront investment, the security it will give your business financially is certainly worth it. Plus, this will give you serious peace of mind, as well as the opportunity to expand your business more safely!