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Starting and running a small business is not for the faint-hearted.

The terrain is saddled with many pressures that new entrepreneurs could find themselves raking up more debts than they initially imagined, if care is not taken. Undoubtedly, strong finances can keep these small businesses running for longer and cushion them from business shocks. Already, news reports indicate that over 900,000 SMEs risk going out of business mainly because of dwindling finances. It is necessary to know other challenges you might face when running a small business and below are a few.

1. Rising business debts

According to statistics, 80% of small businesses in the UK are owed various sums of money. On average, almost every small business is owed 30,000 GBP. These debts arise from providing services or selling products that are yet to be paid for. The truth is, in many instances, small businesses are focused on getting their goods and services quickly to the target market. While at it, the tendency to give their wares out in hopes of getting paid later seems to take the upper hand. This can cause company debts to rise if their income is affected, potentially causing the company to run out of money. For this reason, it is vital to understand how development exit finance can be used to your advantage should a financial crisis hit your business, as exit financing can help avoid bankruptcy and aid with financial recovery.

In such cases, it might become necessary to look for other sources of income to keep the business afloat while working on getting these funds back. For example, if you are a technology-enabled business that needs investments, institutions like Sturgeon Capital will be helpful.

2. Failure to operate within a budget

Perhaps, the primary reason for this is the seeming inexperience of new entrepreneurs. Having a budget is a prime responsibility of any business owner. Unfortunately, not many see the critical nature of running within a set budget. It, therefore, explains why some SMEs use up the little capital they have to oversee miscellaneous expenses. Moreover, those who manage to make some profit fail to separate that revenue from petty cash. Additionally, some SMEs owners continue to keep company and personal monies in one account. This, unfortunately, gives rise to the misappropriation of funds. Hopefully, the tide will change for the better as more small businesses improve on their financial operations.

In the long run, when it’s time for accounting and auditing, these businesses are found wanting. Budget keeping is good for business and, as a matter of fact, for all financial areas of life. It becomes a working document that helps to analyse business expenditures. Indeed, it is a challenging situation that needs constant addressing. Hopefully, as it becomes a topical business issue, more SMEs will join the discussion on the importance of budget setting and staying within limits.

3. Inadequate planning for unforeseen business expenses

Equipment repairs, professional service fees, business travel expenses are some examples of unforeseen expenses in any establishment. The unwelcoming news about these unforeseen expenses is their potential to derail your financial plans. In other words, they can roughen up your money matters as a business.

Therefore, it is advisable to always set money aside to attend to these so-called business emergencies. If it helps, you may want to set up a business account solely reserved to handle unforeseen expenses. Moreover, you may want to consider investing in a financial product offered by the bank that gives special interests. In other words, you set the tone for that account to grow or multiply as you take care of other business matters.

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