It is possible to grow your business too quickly, it’s called overtrading and it can be dangerous.
Managing growth can be tricky, requiring a careful balancing between meeting customers’ orders on the one hand, and not over-stretching the resources and ability of the business to meet these orders on the other.
This constant balancing act is at the heart of a key risk for many businesses – the risk of overtrading – or the ability of a business to safely finance customer orders, before these orders are paid for by customers, without running out of the cash that the business needs day-to-day.
It’s often a particular dilemma for start-up and high growth businesses – finding the cash to fund business expansion, before being paid by your new customers. Even long-established businesses can be affected by over-trading. So all businesses should be aware of the risk and take active steps to prevent it. Luckily, there is a wide range of practical steps and actions that can be taken to manage business growth safely and avoid the risk of overtrading.
Step 1: Listen to your accountant
Your accountant will often be the first to spot the warning signs of overtrading. Listen to advice offered to you, carefully, and then act on it. Do not bury your head in the sand and ignore good advice. Advance planning and taking preventative steps now, could save a lot of trouble later and make the difference between business survival and extinction, especially in the early stages of business growth.
Step 2: Know your cashflow
Cashflow forecasting is an essential tool for any business, either new or well established. Read the ThinkBusiness.ie cashflow guide for more information. You need up-to-date financial information at your fingertips, to help you assess and plan the impact that any business expansion will have on yourThis post was originally published here - https://www.thinkbusiness.ie/articles/how-to-handle-business-growth-spurts/ on