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Financial Failure in Business - 10 Tips on How to
Avoid It
Business is the backbone of
the world's economy. This is where the most jobs and wealth are
created. A large percentage of businesses are entrepreneurial
(or start out that way). Unfortunately many do no make it. This
article gives some tips on how to avoid financial failure:
1.
Detail financial planning must be done before embarking on a
business. This must continue throughout the existence of the
business. Planning should include cashflow projections and
sensitivity analysis on key parameters.
2.
Find out what requirements financiers have. Position the
business around it; keep the credibility of the business intact
and work on the relationships with financiers.
3.
Enhance the financial acumen within the company. Management
needs to understand the meaning of financial statements,
cashflows and financial ratios.
4.
Inventory should be managed at optimum levels. Have a proper
stock system to manage it. Only keep stock items that moves fast
or that is strategic important.
5.
Control the growth of the business to acceptable levels.
Understand how much growth is sustainable and how it will be
financed.
6.
Targeted gross margins should be well researched and form part
of the business- and marketing plan. Work as far as possible to
this target. Avoid doing business at all costs.
7.
Do
everything in your power to ensure that at least a minimum
turnover (that cover expenses) is achieved. Research the market
and do proper pinpoint marketing.
8.
Control expenditure diligently. Know why money is spent and how
it is spent.
9.
Have a strict credit policy. Follow the policy. Ensure that
customers that do not keep their commitments are professionally
dealt with.
10.
The most important aspect of the business is to manage its
cashflow. Cashflows must be projected and monitor on a monthly
basis (or shorter if required). Be pro-active in handling
potential cashflow problems.
Copyright©
2008 - Wim Venter
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Wim
Venter is the CEO of
Ventex Corporation, a business development
consultancy. To receive more information on financial
failure and other business related topics (articles, case
studies and tips) sign up for our free
newsletters.
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