Businesses are constantly innovating and finding new ways to access the labour, supplies, and markets they need to grow and thrive. Over time, this has driven globalisation, bringing down trade barriers, and helping companies to do business more directly and efficiently over greater distances. It’s also the driving force behind digitalisation in business, giving them the ability to communicate, share data, send funds, and collaborate instantly. However, it has also made financial management much more complex.
All posts by Will Roffe
To most entrepreneurs, the idea of spending years developing a free, open-source content management system sounds like a poor way to make a living, much less to start a successful business. Matt Mullenweg, however, did just that in creating WordPress, and wrote himself into the history books in the process.
In business, money is always scarce. Even if they could, businesses can’t afford to simply sit on large amounts of working capital. When times are good, there is always one more thing a business could be investing in to become more competitive, to drive growth, or to make itself more efficient. After all, there are always competitors battling to innovate their way to the top of any given industry’s food chain. Stopping to save up an emergency fund is much the same as simply stepping out of the race.
Every few months, another major data breach makes headlines, reminding us that cyber criminals remain a real and growing threat to businesses and private individuals. Despite these constant reminders, most businesses still have little or no protection from cyber security threats. As a result, the scale and frequency of cyber attacks has continued to grow in recent years.
A growing proportion of businesses rely primarily on the Internet to operate, existing almost entirely online. Their workspaces, as well as their products, are often entirely digital. Many, and occasionally all of their suppliers and employees are likewise online, and exist as part of a much better connected global market than the physical world that most businesses function in.
Entrepreneurs often view online e-commerce stores as relatively easy ways to reach customers and build a profitable business. In actuality, online retailers face fierce competition and tend to be put into a difficult financial position by their very business model.
Tech firms need strong cash flow management skills to thrive. While these kinds of manufacturers are seen in the popular imagination as overflowing with cash, the reality is that they face the same financial pressures as other businesses, plus a number of other potential complications. Not only do they rely on long international supply chains, but they also occasionally face astronomical costs without any prior warning.
Wholesalers occupy an important, but difficult position between manufacturers and retail businesses. They work directly with manufacturers to efficiently import goods, and help retailers to access these affordably and without the usual bureaucratic hassle. In essence, they function as a logistics specialist for both their customers and their suppliers.
For a manufacturer, getting and maintaining control over working capital is a particularly critical issue. Ensuring that revenues come in on time, so that timely payments can be issued to suppliers, is critical. After all, a manufacturer can’t operate efficiently, or meet deadlines, if its supply chain is interrupted in any way. Where other businesses would be seriously inconvenienced, a cash flow interruption can completely halt production for a manufacturing business.