Prepare for success.
The world of business is exciting, and full of both opportunities and risks.
Success comes through being able to see opportunities, determine associated risks, and follow the best opportunities, with the minimal risks. To do this requires some understanding of money, management, people and the world of business.
This course provides you with the foundation you need to develop a career in business.
Modules
Note that each module in the Qualification - Foundation Diploma in Business is a short course in its own right, and may be studied separately.
Managing Financial Problems in Business
When any business has financial difficulties, there are three things that should always be looked at closely:
- Financial service providers
- Spending
- How payments are collected
Financial Service Providers
Most businesses need a banking service, and usually credit card processing facilities. Some utilise other electronic payment services such as Paypal or Moneybookers. Some will use financial advisors, accountants, bookkeepers, tax agents, loan brokers, or other services as well. The financial services industry is large, diverse and does contribute in a positive way to helping businesses track, process and manage money in a world that can be complicated.
However, these services all make charges to businesses that use them, and these businesses in themselves have financial costs.
When a business has financial difficulties, it may sometimes be caused by excessive and sometimes unnecessary costs in the financial services they have set up.
Significant cost savings can sometimes be made by reviewing and reorganising financial services, or perhaps changing financial services providers.
Many providers in this sector are highly competitive with each other. You may be able to renegotiate loans with an existing bank or move to a different bank to reduce the interest rates that are being paid, or you might be able to spread the repayment of a loan over a longer period of time to reduce current monthly payments. It may cost slightly more in the long run, but in the short term it could make your business viable once more.
Some banks require large security deposits in order to provide you with credit card facilities. It may be possible to move to a different bank or another system, such as Paypal, in order to reduce the security deposit required, or to even reduce service charges applied when processing credit cards.
Spending
It is prudent to routinely review spending on staff, supplies, rent and any other outgoings. Identify and eliminate waste.
- Are you renting an office that is bigger than you need?
- Do you need an office at all? Could you work from home?
- Are you buying supplies (e.g. stationary, raw products, fuel, sales stock) well in advance of when it is needed? Some businesses may purchase things today that might not get used for 6 months. This means cash is being spent before it needs to be spent; and more space in the workplace is being given over to storage than what is necessary (this may mean a larger work space is required than what is really needed).
- Can you buy in bulk? You may find that you can purchase 1000 items of a particular product cheaper than 100 items of the same product? This can be more cost effective and increase your profit margins. But be wary if it could take a long time to sell all of those products.
- Do you have too many staff? Are you paying them too much? Could you cut down on staffing costs? For example, could you use freelance consultants for some roles, such as web design? A freelancer may charge a higher hourly rate than a paid staff member, BUT you do not have to pay them sick pay or holiday pay or other staffing benefits. Would you be better off having a few staff members who are really good at what they do rather than many staff who are less skilled?
- Do you spend too much money socialising? For example, Bill took his staff to the pub on a Friday night after work to reward them for the hard work that week. Whatever time he got there, all his staff would be outside waiting for him to get the first drink. He often bought most of the drinks for the night. This could sometimes cost him quite a lot of money. Other staff members hardly ever offered to buy a drink. Finally Bill realised that whilst it was nice to socialise in this way, it was costing him a lot of money. He decided to stop doing this each week and cut it down to once a month. He thought of other ways to reward his staff for their hard work, such as buying cakes or biscuits on a Friday.
Payments
Consider how clientele pay. Offering credit to customers can be normal policy in some situations; but asking for payment on supply of goods or services can reduce financial risks, provided the money you take in advance of providing services, is managed appropriately. Businesses that are paid sooner are less likely to risk having cash flow problems.
Consider:
- Changing terms of trade to require payments to be made sooner by clients.
- Introducing penalty fees for late payment of accounts.
- Withdrawing services from customers who are not making reliable payments
- Being quick and efficient in your credit control.
- Using a debt collecting service.
- Providing positive incentives for on time or advance payments (e.g. 5% discount if paid on delivery).
