When it comes to business, there are a lot of things that can go wrong. One of the most serious is bankruptcy. Business owners often worry about it, and for a good reason: bankruptcy can lead to the closure of a business, the loss of jobs, and even personal financial ruin. The saddest part is that 50% of small businesses might have to experience this five years down the line.
Various variables cause bankruptcy. Find out what these are and how you can protect your business from them.
Employee Theft
It’s estimated that businesses lose a staggering $50 billion on employee theft annually. It includes things like stealing cash, supplies, or even selling company secrets. While preventing all employee theft is impossible, you can reduce it by stopping unrestricted access to certain rooms. You can do this by installing electric strike devices on your door frames. These devices will only allow entry to authorized personnel. There are also a variety of things you can do to prevent employee theft. Here are some of them:
- Do background checks on all prospective employees.
- Implement a system of checks and balances.
- Create a culture of transparency and open communication.
- Promote a culture of respect and trust.
Preventing criminals from infiltrating your company is one of the best ways to prevent employee theft. It’s even better if you can deny them access to essential rooms. So consider these options if you want to save your company from theft.
Fraudulent Suppliers
There are plenty of suppliers out there who will try to take advantage of businesses, whether it’s by overcharging, providing defective products, or not delivering on their promises. This can seriously strain your finances and, in some cases, lead to bankruptcy. To avoid this, you should:
Research your suppliers thoroughly before doing business with them.
- Get everything in writing.
- Check references and reviews.
- Keep track of all correspondence.
- Finally, never pay in full upfront.
By taking these precautions, you can avoid being taken advantage of by fraudulent suppliers.
Unregulated Spending
Many businesses go bankrupt because they don’t have a handle on their spending. It’s often the result of not having a budget or sticking to it. You can start by having an accountant or bookkeeper track your spending for a month. It will give you a good idea of where your money is going. Once you know where your money is going, you can start setting limits on what can be spent and when. You should also have a system in place for authorizing purchases. It will help you track spending and prevent one person from going overboard.
Having a handle on your finances is essential to avoiding bankruptcy. By tracking your spending and setting limits, you can ensure that your business doesn’t overspend and end up in debt.
Too Much Debt
Many businesses go bankrupt because they’re unable to pay their debts. This can happen for several reasons, such as taking out too much debt, not being able to generate enough revenue, or having too many expenses. If you’re struggling to pay your debts, you have options.
First, you can sell assets you don’t need. Hire an accountant and see which assets are worth selling and which ones you should keep. Second, you can negotiate with your creditors. This is often easier said than done, but it’s worth a try. You can also try to get a loan from family or friends. Another option you can do is refinance old loans at a lower interest rate. This will reduce your monthly payments and give you some breathing room.
Finally, if all else fails, you can file for bankruptcy. This should be considered a last resort, as it will have a significant impact on your business and personal life.
Family Problems
Lastly, there’s always the possibility that family problems could lead to bankruptcy. It’s often the case when businesses are family-owned. If there are disagreements about how your family should run the business, it can lead to financial problems.
To avoid this, you should plan how the family will run the business. This should be laid out in writing and agreed upon by all parties involved. You should also have a system in place for resolving disagreements.
Additionally, you should talk about succession beforehand. Succession can motivate family members to stay involved in the business and prevent fights over who will take over when the time comes.
There are several things you can do to avoid bankruptcy. By following the tips above, you’ll know how to handle your business so you can avoid bankruptcy in the future.
