Businesses across the country face significant challenges every day.

By staying adaptable and financially prepared, companies can turn challenges like shifting regulations, evolving market trends, and fluctuating costs into opportunities for growth. A rock-solid financial foundation helps businesses weather the storm and navigate uncertainty. But how can you tell if your business is truly financially strong?

Here, we’ll share five signs that may tell if your business is financially thriving — plus, tips on how to strengthen your financial foundation to succeed in any economic environment.

Cash flow is the lifeblood of any business, and positive cash flow signals a position of financial strength.

Regularly bringing in more money than you’re spending means you have more levers to pull when the economy shifts. You can use that cash for a robust emergency fund, for example, or reinvest in the business to expand your operations, deploy new technologies to bolster efficiencies, or even bring new innovation to market.

If your current cash flow is not yet where you’d like it to be, explore options to maximize the money flowing into your business and minimize the money flowing out. You might opt to negotiate shorter payment terms with clients, for example, or negotiate longer payment terms with your suppliers to give you more time to pay.

 

While every business owner feels tempted to focus on their biggest and best clients, it’s important not to put all your eggs in one basket. Relying too heavily on a single client — or serving a very niche segment of the market — significantly increases your financial risk. If you lose that client, or the niche industry you serve is hit hard by economic uncertainty, you risk losing a large portion of your revenue.

On the other hand, a well-diversified client base means you can more easily recover from losing any one client since that client will provide a smaller portion of your total revenue.

Depending on your business model and the clients you serve, you may have options to diversify your revenue streams. Continually marketing your business to new clients allows you to build a robust pipeline of leads, while adapting your offerings to serve multiple markets builds resilience. You could also explore new business models, like introducing subscription services that provide predictable income.

A key part of building financial strength is managing your operational costs without sacrificing performance. Financially strong companies look for ways to bolster efficiencies, from identifying and addressing cost inefficiencies to investing in new technologies or automation to support growth.

That doesn’t mean your business needs to run perfectly to be financially strong — but it does mean you should regularly reassess your operations to look for areas of improvement and take steps to improve efficiency.

Every business has a unique path to cost-efficiency, so your plan will depend on your current operations as well as your business goals. In general, you should have a firm understanding of the key bottlenecks and inefficiencies in your business, and have a plan to improve these inefficiencies on a timeline that makes sense for your business.

A critical aspect of being “ready for anything” is planning for the future, and financially strong businesses rely on forecasting to help prepare for whatever may be just over the horizon.

Financial forecasts help a business anticipate how changes outside their business — like economic uncertainty or supply chain disruptions — might impact their finances. They also help map out how different decisions within the business may impact financial strength.

Financial forecasting starts with quality data, and your merchant services solution can be a powerful source of insight. Whether tracking sales trends or identifying seasonal slowdowns, the right system provides real-time access to transaction data.

Review the analytics options already available to you via your point of sale (POS) solution to ensure you’re leveraging these effectively, considering that it might be time to upgrade. 

Capital can play a key role in helping you reach your goals, whether you’re looking for financing to expand your business or just providing a cash buffer to navigate uncertainty.

Financially strong businesses have a sound credit profile, including a history of managing their credit responsibly. They’ll often also apply for financing at the optimal time, even if they don’t need capital right away. Finally, financially strong businesses will ensure they have access to a range of credit and lending tools — like business credit cards, lines of credit, and loans — so they have plenty of options to access capital when they need to.

Good business credit starts with strong financial management: Making sure you’re paying your suppliers and lenders on time, and only taking on a level of debt you can reasonably manage. If you need additional credit or lending options, time your applications when they’ll be most advantageous for you, such as locking in a fixed-rate loan when interest rates are low, to secure the best terms possible.

No matter where you are in your business journey or what your ultimate goals are, access to trusted financial advice helps set you up to succeed. Our dedicated team of business bankers can help you map out a plan to reach your financial goals, as well as connect you to financial solutions that can help you along the way.

Want to know how financially strong your business is? Take our interactive quiz to assess your company’s financial health and get insights to help you grow with confidence. Click here to take the quiz.