CFO Services | Paying Bills Late a Poor Business Strategy
Small businesses in Canada are facing extremely high failure odds says CFO services. With half of all small businesses in Canada failing within five years.
Industry Canada did a survey, in order to find out why so many Canadian small businesses were failing. And what they found was very surprising. That business owners failed due to three main reasons. That attributes to the vast majority of entrepreneurs to close the doors to their business.
The single most common reason that business owners failed. Is because they were not able to find customers to buy products and services, which cause 42% of failed entrepreneurs to close their doors.
29% of entrepreneurs ran out of money. That is why they failed. And 23% of failed entrepreneurs were not successful because they could not find or keep staff in their business says CFO services.
And the first reason, not being able to find enough customers. And the second reason, running out of money. Our hand-in-hand with each other. Because one can affect the other.
And while business owners can end up running out of money, even if they do not have a hard time finding customers. If they cannot find customers, they are not going to have the revenue they need to grow their business.
And while there are many things that business owners may run out of money because of. There are several things that can give them warning signs that they are running out of money. That they should be aware of, so that they can fix the problem, and continue growing their business.
This is why CFO services recommends. That entrepreneurs avoid trying to grow their business as quickly as possible when they first open the doors to their business. And instead, focus on running their business very well versed. They should get into the habit of understanding their margins and profit first.
As well as paying their bills on time regularly. And if they are not making money, figuring out what they need to do when they are this size. In order to have create a profit. Whether that is minimizing expenses, increasing revenue or both.
If they can get into the habit of paying bills, and understanding their finances while they are small. And learning what they need to do to become more successful. They are going to be able to have a better time growing their business. So that if they run into these troubles when they are larger.
They will already know what to do, because they have practised great business strategies when they are small. And besides, CFO services says that if they do not understand their finances when they are small. A business owner will not understand the finances when they are large as well.
The sooner an entrepreneur can get into the habit of paying their bills regularly. The sooner they are going to be able to understand their finances. And if they are ever unable to pay their bills. That is a great sign that they need to minimize expenses and grow their revenue.
Often, business owners think that it is a valid strategy, to pay bills late says CFO services. And they start doing that, because they do not have enough money to pay all of their bills. And then stop paying all of their bills on time. So that they have a greater cash flow in their business.
However, this is a very poor strategy. And will actually cause entrepreneurs to run into more problems. And when entrepreneurs get behind paying their bills. Not only do they not understand their margins and their profits.
But they also do not understand their overhead. And if they have expenses that are unsustainable. Because they are not paying attention to all of those expenses in the month that they happen.
By paying bills on time. What that does says CFO services. Is it forces entrepreneurs to get good at selling products and services when they need to. And knowing their numbers extremely well.
When business owners are not able to pay their bills on time, it might be because their overhead is larger than it should be. But they are not aware of it, because they are not paying it on time.
If they realized the first month that they were not able to pay their bills. They should have looked immediately at their expenses. At the same time as growing their revenue. So that they can understand.
What they need to do in order to ensure that they have enough money to pay those bills. And while many people think of expense minimization as eliminating bank charges, or cutting their phone bill.
However, that is not truly going to help entrepreneurs save money. Because those are some of the least impactful expenses that they have. With the two largest overhead expenses they have will be the rent of their office space, and their administrative staff.
And while it is going to be very difficult for an entrepreneur to minimize the rent that they are in. Less it is time for them to renegotiate their contract. The other option would be to lay off staff. Which may not feel like very fun thing to do. To do anything else would be unethical.
The reason why it would be unethical to avoid laying off staff. Is because eventually, if a business owner does not fix this problem. It will continue getting worse. Until a business owner has no option, but to stop paying staff. Because they still have overhead expenses that are unmanageable.
Therefore, by laying off a staff member. Means that they should be able to continue operating, so that they can not only save their business. But ensure that all the other people that they employee can keep their job as well.
By paying more staff than an entrepreneur can afford to, they put the entire business and team in jeopardy. Therefore, it is very important that entrepreneurs understand what needs to get done, in order to minimize their overhead expenses. So that they can have a successful business.