How to Bolster Your Business Finances for 2023
Today’s challenging economy calls for even greater foresight, planning and discipline than usual. As the new year approaches, it’s a good time to reevaluate your company’s financial foundation and take steps to make it as resilient as possible. The following ideas are intended to help you position your business to not only prevail in the face of today’s economic headwinds, but also capitalize on opportunities that may emerge in the coming months.
Build Your Business Credit Score
A strong business credit score is essential to your company’s financial health. It gives lenders, suppliers, credit card companies, landlords and others considering working with you a quick glimpse into your creditworthiness. Generally speaking, the higher your score (0-100 scale), the more likely you are to be approved for financing and to get more favorable terms — a lower interest rate or larger line of credit, for example. Typically, business credit scores of 80-100 are considered low risk, 50-79 medium risk and 1-49 high risk. Most small business lenders require a minimum score of 75.
Like your personal credit score, your business credit score reflects your track record of managing your debt. It takes into account your company’s payment history, outstanding balances, credit utilization ratio (credit used/credit available), number of years in business, business size and the type of industry you’re in, as well as any liens, bankruptcies or judgments connected with your business.
Here are some ways you can work toward improving your business credit score:
- Make payments on time every time.
- Keep your credit utilization under 30%.
- Update your credit information and monitor your business credit report for accuracy with each of the three major business credit bureaus: Dun & Bradstreet, Experian and Equifax.
Minimize Unnecessary Spending
Looking at your company’s budgets, and bank and credit card statements with fresh eyes may help you zero in on areas where you could or should be spending less. Review statements for the past six or 12 months to identify opportunities for eliminating excess spending.
Here are just a few places to look:
- Subscriptions - It’s easy to fall into the habit of “setting and forgetting” when it comes to subscriptions to software, apps, periodicals or networking groups. Check in on those subscriptions to see if and how much they are actually being used. Discontinuing underused subscriptions may save the business more than you think, particularly if you are paying a per-person rate.
- Travel - Pandemic conditions accelerated adoption of meeting technology, and acceptance of virtual meetings and webinars. Leverage that familiarity by choosing technology over travel whenever you can. While certain relationships and circumstances may necessitate face-to-face interactions, it makes good financial sense to be selective, looking for opportunities to avoid the high costs associated with flying and even driving right now.
- Marketing - With the rise of digital marketing, companies now have a broad range of tools and channels to consider. Evaluate the marketing efforts you have in place right now and assess how well they are performing for you. Is the ad campaign you’re running in the leading industry publication bringing in enough leads to justify its cost, or could you generate just as much (or greater) engagement with a lower-cost social media program? We all know that creativity is key to effective marketing; put the same level of creative thought into building a more cost-efficient and successful program.
Do a Dollars-and-Cents Analysis of Where Your Employees Work
Working from home became the norm for many businesses when pandemic restrictions were in place. Some have permanently adopted remote or hybrid work arrangements. Others have brought their teams back to the office. Even if you’ve done the analysis before, it may behoove you to crunch the numbers once again to see how much your chosen work model is costing you in overhead, especially as energy rates continue to rise.
Would reducing the number of employees who are in the office on any given day enable you to downsize your space, reduce your utility bills and cut down on office supplies? Weigh those potential savings against the benefits you might reap from having the team together on-site to determine whether you might be operating more efficiently.
If you decide to keep your people at the office some or all of the time, you can save on utilities by putting energy-saving measures into place — e.g., using a smart thermostat, powering down nonessential lights and equipment after hours, and conducting or commissioning an energy-efficiency audit to identify where you can make improvements. (Explore which efforts may qualify for energy-efficient tax credits.)
(Re)Negotiate with Your Vendors
Most companies are feeling the pinch of the economy right now and are in no position to lose business. Do some comparison shopping to see if your suppliers are giving you the best deal. If not, ask them to renegotiate prices and/or terms or to lock in rates on certain items so you aren’t hit with unmanageable price increases over the next several months.
If your vendor partners aren’t willing to work with you, you may want to consider different companies that are open to negotiating mutually beneficial terms. Remember to factor in any costs, financial or otherwise, that might be associated with making a switch before you ink any new partnerships.
Vision, perseverance and an open mind will help you prepare your business for all of the opportunities and challenges to come in the new year. Get your finances into tip-top shape and embrace 2023 with confidence.
This article is for general information purposes only and is not intended to provide legal, tax, accounting or financial advice. Any reliance on the information herein is solely and exclusively at your own risk and you are urged to do your own independent research. To the extent information herein references an outside resource or Internet site, Dollar Bank is not responsible for information, products or services obtained from outside sources and Dollar Bank will not be liable for any damages that may result from your access to outside resources. As always, please consult your own counsel, accountant, or other advisor regarding your specific situation.
Posted: November 29, 2022