Financial Items to Consider when Expanding your Corporation

What to Keep in Mind When Growing your Corporation

Expanding a corporation can lead to significant financial benefits and provide your business with many opportunities to succeed and thrive. However, it’s critical that you take steps before you begin your expansion to help your corporation avoid problems in the future. Many of these concerns are financial. There are a lot of very successful businesses that wind up in significant trouble after an expansion because they didn’t do the proper homework before making their move.

Here are four financial items you will want to consider when expanding your corporation.

Securing Growth Financing

Businesses require financing in order to grow. For many corporations, this means finding external financing. One way of acquiring the necessary funding is to apply for a commercial loan. Banks and other financial institutions are often willing to extend loans to established businesses that have strong business plans and growth strategies.

Another option is to find new investors for your corporation. This can include angel investors, venture capitalists, and other equity partners. You will likely be able to find local associations and programs that connect organizations with investors.

However, bootstrapping your growth may be possible, depending on your financial situation and your goals. You may be able to reduce expenses and/or use your profits or current earnings to fund your growth. If this is the path you need to take, you will need to have a strong command of your budget and be aware of all potential costs you may incur. Otherwise, you could potentially damage your core business while attempting to expand it.

Cash Flow

Cash flow is important for every business, but it’s critical for a corporation that is expanding. Cash constraints can limit growth and prevent you from taking advantage of opportunities. Therefore, financial management is incredibly important. Not only will you need to ensure that you’re making the best use of your finances, but every aspect of your corporation’s capital must be controlled so that you can maximize your cash flow. This includes credit management and debt control.

Expanding a corporation requires extensive planning to anticipate your financial needs and ensure that funding is available when you require it. Without these plans, your business expansion can fail.

Stock Control and Supplier Management

Holding onto large amounts of inventory stock, especially obsolete stock, can be a big financial drain on your corporation. Setting up proper supplier management so that you only have the required inventory on hand is critical as your business grows. This is especially true if you are expanding into a completely different market (such as a different country). You may need to establish a completely new supply chain in this market and failing to do so correctly before you expand can seriously hurt your business financially.

Know Your Limitations

Many corporations struggle, and some even fail, when they try to expand too quickly. Before you attempt an expansion, it’s important that you take the time to figure out a “worst-case scenario” as to how much your expansion will cost and which resources it will consume. This will give you a dollar amount that you will then have to see if your expansion can be financed.  

Opening additional offices or locations, and hiring employees to work at these locations, is costly. It’s important that you only attempt expansions that your corporation can handle.

Professional Assistance

The professionals at Ralevic & Ralevic LLP can provide extensive accounting services for your corporation. Our team of Chartered Professional Accountants (CPA’s), Chartered Financial Analysts (CFA’s) and Licensed Public Accountants (LPA’s) do more than just bookkeeping. We can also provide budget preparation services and financial forecasts as well as assist you in developing professional business plans to attract investors to your business, making your expansion possible.

Our team is also able to leverage our specialized industry knowledge and expertise to drive transformational changes across your corporation, helping you expand more efficiently.

For more information, please contact us today.

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