3 common financial stumbling blocks for businesses

Entrepreneurs always come across financial hurdles in everyday life. Stumbling over them can, in the worst case scenario, mean bankruptcy. These are the 3 most common financial stumbling blocks that companies face!

Unpunctual payment by customers

An extremely painful aspect for many companies is the fact that customers pay late or not at all. This disrupts even the best liquidity planning and endangers goals. Entrepreneurs would like to invest in modern machines, hire new employees or otherwise make their business fit for the future, but if the capital planned for this is not available due to a lack of customer payments, further development is at risk. The remedy is good receivables management, which is perfectly automated in the form of powerful software and has a clear process. Incorporating other instruments such as SEPA direct debits can also help. However, personal contact is also important, for example in the form of calls from employees. As a result, companies can fundamentally consider whether they should deal with difficult customers or let them go. Payment reliability certainly plays a role here and should not be neglected.

Surprising tax payments

Especially if there is no liquidity planning, it can happen that tax (back) payments are simply forgotten. This represents an enormous sudden burden that drives quite a few companies to ruin. In the worst case, entrepreneurs come into conflict with white collar criminal law. Of course, there are numerous other cases in which entrepreneurs and private individuals need support in the form of a specialist in capital criminal matters. In these cases, those affected should seek professional advice Criminal defense in Hamburg and the rest of Germany to protect their own interests in criminal proceedings. A good defense is essential in order to be able to successfully appeal and appeal if the worst comes to the worst. The tax burden in Germany can be very high, which restricts and displeases many companies. Unsurprisingly, legally minimizing the tax burden is one of the reasons for setting up a company abroad. Regardless, entrepreneurs should always keep an eye on tax payments.

Low margin – the root of all evil?

In order for a company to exist in the long term, it must be profitable. Unfortunately, especially in recent years, it has become increasingly common to see that many companies are suffering from falling profit margins. It’s not just in the construction industry that declining margins are affecting companies. The EBIT margin (EBIT – earnings before interest and taxes – divided by gross profit) is ideally between 20 and 33 percent. If it is too high, the company grows too slowly – if it is too low, the company is too unprofitable. Adjusting screws such as excessive staffing ratios, poor processes, underselling or underutilization can be addressed with the help of a good, tried-and-tested management consultancy for SMEs. Low margins are almost the biggest stumbling block. Then missed customer payments and unexpected tax back payments become much more significant. A good basic profitability gives greater scope, which also forgives mistakes.

Avoid serious stumbling blocks for greater safety

Anyone who is not aware of additional tax payments and is struggling with a margin that is too low will bring their company into trouble through their own fault. There is initially less control over customers who do not pay or pay late. However, good receivables management can solve the problems here. Getting these 3 significant financial stumbling blocks out of the way is vitally important for companies.

Published by:

Alexandra Ruffle

Alexandra Rüsche has been a member of the Mittelstand-Nachrichten editorial team since 2009. As a journalist, she writes about tourism, family businesses, health issues and innovations. Alexandra is a member of the DPV (German Press Association – Association for Journalists). She can be reached via the editorial team’s email address: redaktion@mittelstand-nachrichten.de