Keeping your business financially healthy can be difficult even in prosperous economic times. In times like these, as we're dealing with the remaining fallout of the pandemic, inflation, and a possible recession, maintaining financial health is critical. How you manage your business's finances can be the difference between success and failure, so ensure you are doing everything in your power to stay financially healthy. The following tips are a good start.

1. Have an Emergency Fund

Having an emergency fund is imperative for keeping a financially healthy business. If we've learned anything from the past couple years, it's that the unexpected is very possible, and can wreak massive amounts of havoc on operations and revenue. Having an emergency fund to help you get through tough times may be the difference between business failure and the ability to persevere. Take the time to set up a business savings account if you haven't already.

2. Keep a Line of Credit Open

A business line of credit1 is a great way to provide an extra layer of financial security. It gives you the flexibility to draw funds for business purchases as needed, with repayments that are also flexible. With each payment, credit availability is replenished, so you're in control of how much credit you have available.

3.  Get a Small Business Loan

A small business loan1 may also be worth exploring. A loan can give you the funds to purchase equipment, inventory, real estate, or any other business need you have. There are a variety of options depending on your circumstances and needs, including term loans, Small Business Administration (SBA) loans, equipment financing, and more. Speak with your banker to figure out which type of financing works best for you.

4. Keep Your Business and Personal Finances Separate

Keep your business finances separate from your personal finances. This will allow you to keep accounting for both sets of books organized and help you avoid potential tax issues. Set up both a savings and checking account for personal use as well as business savings and checking accounts.

5. Always Monitor Cash Flow

Cash flow is the essence of what makes your business financially healthy, so monitoring it is crucial for sustained financial health.

"If you understand cash flow techniques, you can get ahead of the market," says Skye Schooley at Business News Daily.2 "You’ll even be able to predict cash flow because you understand the revenue cycles of customers, vendors, suppliers and contractors. Every business has high and low seasons; understanding upcoming expenses for employee overtime, replacement equipment and other needs goes a long way to ensure your business is well positioned to handle any bump in the road."

6. Strive for Operational Efficiency

Do everything you can to improve the efficiency of your business operations, because doing so will help you both save and make more money.

"Business efficiency means maximizing your outputs from your given inputs – or making the most of your resources," says entrepreneur and business strategist Tony Robbins.3 "If you haven’t thought about how to improve efficiency in a business, you may well be overlooking places where you can cut down on the time you’re spending on a particular task. This saves you money and manpower in both the short term and the long run. Reducing your costs and maximizing your output are tried-and-true ways to beat your competition and increase your profit margins."

There are many ways to improve efficiency, including software upgrades, hiring, shifting roles and tasks, improving inventory management, streamlining operations, and automating some tasks to free up time and resources for other ones.

The economy may still have a rough stretch ahead, according to recent reports and analyses, so it's important that the financial health of your business is optimized. Consider these tips to better position your business for the future ahead.

 

1. Subject to credit approval. Terms and conditions apply. See a banker for details.

2. https://www.businessnewsdaily.com/15017-cash-flow-strategies.html

3. https://www.tonyrobbins.com/business/business-efficiency/

 

The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice. Any views expressed in this article may not necessarily be those of Nevada State Bank. Nevada State Bank is a division of Zions Bancorporation, N.A. Member FDIC