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The Small and Medium Enterprises (SME) sector of India is expected to contribute approximately 22% to the country’s GDP. Strikingly, as much as 45% of total manufacturing output and 40% of the total export in this country originate from this sector.
Various small business finance schemes have further fostered growth in this segment. In the backdrop of such development, it becomes all the more important that every business owner is familiar with certain financing tips.
Financing tips to follow for business growth and success
Lack of adequate understanding of accounting and finance may cause significant issues for small entrepreneurs. More often than not, they may end up making decisions which may harm the financial health of a business. Here are thus a few pointers to note for business owners, which are required for successful business growth along with easy access to quick business loans in the future –
- Prepare a realistic budget as per business scale and aspirations
To begin with, a realistic budget must be prepared that includes an estimation of income along with expenditure as per a business’s scale of operation. In the initial days of business operation, suitable budgetary allocation should be made for expenses since starting up often requires more resources.
The funding coming in during the early days can also be considerably less. For a certain period of time, expenses are thus likely to be on the higher side and revenue limited. Such a factor should be essentially considered when planning funding.
- Track business expenditure from time to time
It is crucial to track expenses to ensure that you remain within the limits of the decided budget. This becomes particularly important, especially when a business owner is just starting. When there is a clear idea about the expenditures met, it becomes easier to identify the areas where costs need to be curtailed and domains that need further investment.
Such activity can also bear legal implications. If an accurate record of finances has been kept, then filing of tax returns can be done correctly.
- Follow up invoices
Given that revenue is the lifeline of a business, especially the smaller ones, it is essential to keep cash flow at optimum. In that regard, consistent follow up of invoices should help meet revenue targets well within time.
These business invoices serve an essential function. When all details are mentioned in the invoice, it becomes easier to track what is being delivered to a client. The latter also helps gain a fair idea about what to expect for a given period.
The longer time taken to submit these invoices, longer a business owner has to wait for payment. It can ultimately throw a business’s budget out of balance as income would not be generated within the expected timeline. It thus also becomes a good indicator of how much working capital your business would need for the concerned duration
- Take measures to manage business debt
One of the primary challenges in maintaining business finance for small business owners is the running up of debt. If the amount of debt becomes considerably high, it can end up leaving a business drenched in surmounting liabilities.
A realistic estimation must thus be carried out as to how fast the business loan can be paid back and the portion of the profit that needs to be engaged for that purpose. If such debt is allowed to accumulate further, it can take up most of the profit of small businesses.
- Consider local lenders
Another major consideration is to build up a working relationship with a financial institution to manage your business accounts. Choose a lender based on the benefits that are provided. It is better to opt for loans that are more flexible with a competitive rate of interest, for instance, business financing provided by lenders like Bajaj Finserv.
The lending institution also makes the application process hassle-free and quick with the pre-approved offers. Such offers are provided for a range of financial products like business loans, personal loans, etc. You can check your pre-approved offer by submitting your name and contact number.
While it is natural for small business owners to seek business finance immediately, it is important to take a cautioned approach in line with overall financial standing for long-term sustenance. It is one of the essential aspects of being a successful small business owner.
