Foolproof Strategies to Improve a Business Balance Sheet to Secure Finance

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The business balance sheet, according to Norm Brodsky, is the temperature of a business at a specific stage. For investors, this is one of the fundamental documents to scrutinize before deciding whether to throw in their lot with the business or not. The balance sheet tells us important little snippets such as whether the stock is redundant, whether the owner is drying out the business, or whether the business is lumbered with too much debt and more. There are a few ratios that accountants and business specialists use to determine the health and those who are unable to secure a loan due to the balance sheet should consider the following.


Improve Assets Over Liabilities

It's important for a business to have a strong asset base and not have too many debts in the business. Once the business starts relying on the debt too heavily, the balance sheet becomes bottom heavy. A quick test to determine whether the business has enough money to finance their current debt is by doing a quick ratio. This is the current assets over the current liabilities. Ideally, a business should have a ratio of at least 2:1. Anything lower than this spells liquidity problems for the business.

How to Tackle This:

  • Set in place initiatives to improve the faster sale of stock in order to increase cash
  • Lower debt by paying off as much as possible
  • Convert redundant fixed assets into cash, such as old machinery that is no longer part of the business cycle

Inject Cash Into the Business

No investor wants to look at a business and see all its profits drained by the owner. Even if the profits aren't drained by the owner, investors also want to see whether the owner made their own contribution to the business in order to even out the risk a bit.

How to Tackle This:

  • Be more frugal with business drawings if it seems to eat into the profits
  • Invest personal funds into the business, but if you don't have any then it might make sense for you to borrow. AAA Credit Guide reviews Rise Credit here which demonstrates how such options make it simple to gain access to a financial boost. The more frequently you borrow money using this method, the lower your rate becomes.

Manage Stock More Effectively

There are certain industries where stock can sit on the floor for more than 90 days, but when it's a retail environment this can be dangerous. Stock that turns effectively will bring a much-needed cash boost to the business. To get rid of the slow stock, special offerings and discounts are often introduced to entice buyers. It also reassures investors that the business will be able to meet their monthly payments as their stock moves off the floor quick enough to generate a healthy income.

How to Tackle This:

  • Invest in quick-moving stock to cover regular monthly payments
  • Negotiate good terms with suppliers for stock that takes longer to turn

Investors are required to do due diligence before they invest in a business, and the balance sheet is only a small part of the consideration. There are a few more items to improve that will have a positive effect on the balance, but these are good to start with.




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