Running a business, no matter its size, is a challenging endeavor. According to the U.S. Chamber of Commerce, 82% of companies with fewer than 500 employees survive their first year, but only 50% make it to the end of their fifth year.

Despite these challenging odds, Americans continue to pursue their entrepreneurial aspirations. As of 2023, there were approximately 33.1 million small businesses in the United States.

Nearly half of those who close their doors cite a lack of funds as the primary reason. In other words, they need more revenue to pay employees and cover other expenses. Below are the most common financial challenges and strategies leaders use to overcome them.

1. Cash flow bottlenecks

Maintaining healthy cash flow is essential for an organization's operational and financial stability. Finance managers often grapple with challenges such as delayed payments, unpredictable revenue cycles, and unexpected expenses. Proactive cash flow management — effective invoicing, timely collections, and strategic financial planning — is crucial for smooth business operations.

The solution: Leverage a comprehensive software tool, like Microsoft Dynamics 365, to forecast your company’s cash inflows and outflows over a specific period. The right software will analyze historical cash flow and use this data to anticipate future cash flows.

While considering different tools, make sure they have the capability to:

• Analyze cash flows
• Create forecasts
• Address short-term liquidity needs
• Manage debt repayment

A tool with these components helps to make effective strategic financial decisions.

2. Lack of contingency planning

Many organizations, regardless of their size, have traditionally operated under the assumption of predictability and stability in their specific industry or market. However, worldwide events like COVID-19 have highlighted the crucial need for contingency planning.

Without a thorough contingency plan, companies are vulnerable to unforeseen disruptions such as economic downturns, supply chain interruptions, natural disasters, and public health crises. These disruptions can result in severe consequences including revenue loss, operational interruptions, layoffs, and even business closures.

In today’s unpredictable environment, organizations must accept uncertainty as the new normal and make contingency planning a key component of their financial strategy. This proactive approach is essential to avoiding financial instability and mitigating potential long-term consequences.

The solution: Implement a software solution that understands critical business functions. With the right tool in place, businesses will be able to:

• Create a tiered approach to suppliers and have relationships with multiple vendors should one fall short.
• Communicate and update stakeholders on a timely basis, which is important when talking to vendors or customers.

3. Insufficient marketing and advertising

Refrain from assuming people will discover the products and services of a business independently.

While potential customers might eventually find out about the business, some businesses will no longer be operating. People need to know that a business exists to generate revenue, which requires a solid marketing and advertising plan.

Although marketing and advertising are often used interchangeably, they are distinct processes.

Marketing involves researching the market to develop a product or service, whereas advertising aims to bring the finished product or service to the attention of potential customers.

For example, when creating an organic dog biscuit, marketing would involve researching the demand for such a product. Are customers interested in buying organic dog biscuits? Are there existing competitors in the market? Most importantly, what sets this organic dog biscuit apart from others?

Once this marketing information is available, the product moves to the advertising stage, which involves informing the public that the organic dog biscuit is now available.

The solution: Utilizing software like Microsoft Dynamics 365 will provide essential integrated customer data on products, services, and transactions. This data can uncover valuable opportunities to segment and engage existing customers with marketing campaigns tailored to their interests and needs. This information allows the business to explore profitable opportunities outside of their current product or service offerings.

4. Cybersecurity threats

The rapid increase in security threats and breaches has put financial data at significant risk in recent years. Cybersecurity, once seen solely as the IT department's responsibility, has become a crucial business imperative that demands close collaboration between finance and other business leaders. Implementing robust cybersecurity measures to protect an organization's most vital information is essential. Finance leaders play a critical role by partnering with IT to ensure the security of financial transactions and systems.

The solution: Check into software that offers best-in-class applications and can provide a comprehensive cybersecurity system to ensure financial data is secure.

Overcome financial challenges with Citrin Cooperman

Navigating the financial challenges of a business can be daunting, but with the right strategies and proactive measures, you can ensure your business thrives. From maintaining healthy cash flow and effective contingency planning to leveraging tools like Microsoft Dynamics 365, mastering these challenges is critical to sustaining growth and stability.

If you need guidance and solutions to overcome your financial obstacles, contact Citrin Cooperman’s Digital Services Practice. Our team is dedicated to helping you achieve financial success and long-term resilience. Contact us today to learn how we can support your company’s journey to prosperity.