Reducing Business Uncertainty
Operating your business requires careful planning and thought.
You can’t remove unpredictability from your business, but you can minimize it with planning
Understanding and forecasting expenses is the only way to keep a business above water. It’s crucial to understand both how much you’re spending, and your expected cash inflows and outflows.
While your profit margins dictate how much you earn, no business can operate without sufficient cash inflows.
You have to effectively manage profits and cash to succeed.
Here are some business situations that can be unpredictable, and how you can manage that uncertainty:
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How Much Payroll?
If your team work different hours every month, you’ll have no accurate way to predict what you’ll need to pay- and that impacts how much cash you need to operate.
More hours worked often leads to more sales, but it will take time to collect payments from those additional sales. In the meantime, you need to pay payroll.
To minimize the impact of this uncertainty, be clear about the number of hours all workers (full time and contractors) will work in a given month.
Stick with contracted hours, at least until you’re in a position where you have money to play with. If you need more hours in a given month, use freelancers instead of adding full-time staff.
When you’re able to generate a consistent level of sales, you can consider hiring full-time workers,
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Repairs and Maintenance
If you have drivers on the road, you can predict most of their expenses. You’ll know how much vans cost, and should have some idea of what you’ll spend on fuel.
Sadly, you can’t predict breakdowns in the same way. If a truck struggles on the road, you stand to fork out large amounts on repair services if you don’t think ahead. To make sure it doesn’t happen, you have two main options. If you’re in the position to do it, you could invest in a service truck like those found on http://www.servicetrucks.com. This would allow you to carry out endless repairs for no extra cost.
If your budget won’t stretch that far, why not subscribe to a breakdown service? There are many options for paying monthly set amounts for services, rather than per repair.
IT issues
If your business is office-based, you may also find computer repairs rocking your budget. A few extreme fixes in one month could even gobble your profits.
By turning to outsourced repairs from companies like https://www.sumasoft.com, you again agree to a set fee for endless repair jobs. If you want something a little more immediate, you could even hire a specific IT professional, and thus agree to a steady salary without unexpected fluctuations.
Just like that, you can eliminate the unexpected.
Where’s The Plan?
Each of these factors should be included in a formal business plan, which is your most effective tool to reduce uncertainty in your operation.
No business can succeed without a detailed business plan, and you need a plan to know how much cash is needed to operate.
If you don’t have a written business plan, create one.
Fortunately, you can find great software to help you with this process. Using software can help you address every important factor in your business, including market research, competitor analysis and pricing.
Business plan software can help you plan your estimated sales, the cost you’ll incur to generate sales, and the cash inflows you’ll need to operate. When you input all of these assumptions, the software will create a set of financial statements for you.
You got this!
This post is for educational purposes only.
Ken Boyd
Author: Cost Accounting for Dummies, Accounting All-In-One for Dummies, The CPA Exam for Dummies and 1,001 Accounting Questions for Dummies
Co-Founder: accountinged.com
(email) ken@stltest.net
(website and blog) https://www.accountingaccidentally.com/
(you tube channel) kenboydstl