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11 Problems & Challenges Faced By Small Business And How to Overcome Them?

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Startups or Small businesses are known to have special requirements. Those needs necessarily become challenges to small business owners. Most common Problems such as inexperience, business size, lack of money, and the lack of resources can get in the way of an entrepreneur’s success.

The small business stands a significantly more probability of failure than a large business, yet many small businesses survive and some thrive. 

 # Problems Faced By Small Businesses

The common denominator of all forms of start-up and new businesses is that they are unknown in the marketplace and many competitors already stand in the market.  In the first few years of small business, companies have come up against a lot of different challenges. Here we will have a look on few Problems and challenges coming in the way of Small businesses and startups-

  1. Lack of Finance

Finance is a huge problem in small businesses. Any business can’t run without sufficient finance. The main reason for this issue is less availability of loans, not getting sanction because of weak finances and small businesses have poor creditworthiness. Due to less budget, businesses are incapable to do good investments for business activities like purchase of raw material for production, stock inventory for retail, wholesale distributorship etc.

You may have to, therefore, borrow funds at a high-interest rate which will affect the finances and your credit rating as well. Banks and industrial investors need collateral security, because most of the small businesses being conducted in the rural and semi-urban areas, these businesses lack the collateral security to get finance for their business.

2. Maintain Production For Manufacturing Businesses

The purpose of an entrepreneur is achieved when he is able to dispose of his products at a price, which covers the profit required to maintain the product cost. In a competitive market, an individual manufacturer or seller has to supply goods that are not inferior to the goods of other competing firms. Therefore, the problem is to maintain and improve the quality of production.

3. Time Management

This is a common problem for 90% of people out there. You will easily escape into this fast-moving competitive world. If you will, running a business is exhausting and consumes more time than expected. To take care of your small business transaction you need to manage time very well and be good at multitasking.

Many business owners get stuck working more than their staff. They fear to take any time away from work to relax or go on a vacation with family.

4. Lack of Managerial Skills

A small business generally lacks managerial skills as it is carried out by a limited number of employees. This means that a single person manages the operations & business activities. Moreover, many enterprises are unable to hire professional experts due to a shortage of funds. This is also a huge problem for small businesses.

5. Marketing Problem

Small business enterprises generally face problems in marketing their goods and services as there are rarely any funds for advertising or sales promotion. In this case, their products do not have a brand name or loyalty. They are fully dependent on the middleman and middlemen exploit these businesses by paying low prices and delayed payments.

Further, due to a lack of necessary infrastructure direct marketing is not possible. Without marketing small businesses will not be able to achieve their goal of sales they planned.

6. Product Quality

Small businesses find it difficult to come up to global standards of quality. They also do not have funds for research to improve on quality. Product quality is their weakest point compared to standards for large scale units.

7. Sickness

It is painful to see most of the small units getting sick due to lack of planning. Skilled and trained personnel is another obstacle. They have to sell on credit but their customers do not pay them on time. There are massive debts. Thus, they lack working capital to keep the Business running. It causes disease for your business.

8. Cash Flow Management

For a small business which is looking at fast growth, ensuring liquidity while simultaneously investing in the business can be a significant accounting challenge. Cash flow is the element that represents the amount of liquid cash available to a business. Effective cash flow management forces us to stay on top of accounts receivable while balancing payables.

9. Creating an Effective Budget

Not all startups and small businesses have funding. So, it is important to create a business budget and follow it. Unexpected expenses can cause financial fluctuations, which may cause businesses to fail. One of the ways to overcome this challenge is to make a budget, that is developed keeping in mind business goals, availability of money, cost of resources, infrastructure needs, and operations. 

10. Creating Efficient Accounting Systems

Ensuring that accounting tasks occur on time or to keep a record of expenses and dues may not be sufficient as the startup continues to grow. To keep pace with growth, businesses need systems that can keep up with changing numbers.

Systems that can provide timely accounting data with growing business needs, data that reflects the state of health and finance of your business at any point of time, and help in accounting analysis to make important business decisions. Efficient and self-sufficient accounting systems are important for the stability of the business.

11. Online GST Filing Procedure

GST compliance, return filing and payments will all have to be done online. Many small businesses are not tech-savvy and do not have the resources for fully computerized compliance. Even as the rest of the country gets ready to go digital, businesses in small cities in India face a major technical problem in the coming days. 

# How to Overcome These Problems

Small business owners routinely face certain problems/challenges within accounting and financial operations that could derail the business if left unattended. Some of these challenges have the power to affect business operations, profitability, efficiency, and sustainability. To identify and understand how to overcome them is important for a small business that needs to grow.

  • Small businesses loans are not getting sanctioned because of weak finances and small businesses have poor creditworthiness.There are several reasons related to small business loans being rejected. Click here to know more. 

     Then how you can get approval for loans?

     Loan schemes small businessmen can opt for?

  • Keeping a manual record of stock inventory is not an easy task. To keep full control on stock inventory you can choose a software like Vyapar app. With this you can easily view your item-wise P&L reports and track which items cover the benefits, required to maintain product cost.

  • Time Management is a common problem for every small business. Understand how you spend your time each day, see if it can be done more efficiently.

For example: If you’re taking too much time in calculating receivables and payables from your customers, the software can do the job better and faster. Use business software like Vyapar instead of doing it manually. It does wonder about saving your time.

  • Every business owner has a client that is consistently late on its invoices and payments. Enter a transaction only & automatically send the Messages to your parties and payment reminder with Vyapar App. You can easily manage your business without the help of professional experts.

  • Online stores are one of the good marketing tools for small businesses. How about having your own Online Store? Best accounting software Vyapar gives an option to create a free Online store and share it with your customers. It also helps to earn customer’s trust & brand loyalty.

  • Inaccurate Financial plannings are a very big reason for business disease. How do you plan your business finance? In Vyapar app it is easy to check financial documents that every small business owner should produce and regularly maintain like Balance Sheet, P&L report, Cash flow report, GSTR, etc. On the basis of these reports you can plan for your future activities, funds and manage it on your fingertips and help your business to grow faster.  .

  • In business Cash flow can be monitored regularly with the help of accounting software, and you can easily avoid human error by doing so. In Vyapar app Get paid faster by using digital payment solutions and make your cash flow positive or try to easily overcome this problem. Know More About CASH FLOW

  • Use accounting apps like Vyapar to track Expenses reports helps to measure the estimated budget for upcoming expenses. 

  • Small Businessmen are not trained or professional accountants to understand the double entries made in the accounts. With the help of Vyapar accounting software, you can do all accounting activities with yourselves. It also helps to create an efficient accounting system for your business free of cost.

  • Vyapar GST billing software could be an answer to this online GST return filing problem. You only need to make your invoice transactions, and the software will automatically generate the instant GST reports with all required information. You can Download these files directly and use them for GST filing. Any errors in the invoice will be clearly identified by the software in real-time, at a time of uploading the files on the portal, which will increase efficiency and timeliness.

You would also like to read this – How to generate E-way Bill?

# Some Common Struggles in Small Business

These are the common struggling causes to every small business and how to avoid them.

  1. They don’t understand their market and customer.

Starting a business without thoroughly researching the target market, ideal customer, and customer buying habits are one of the biggest reason for business failure.

2. They don’t have a clearly defined pricing strategy.

Setting product prices too high or too low will affect sales. Without the right combination of market trends, product quality, customer demand, product differentiation, and the right pricing, a business will fail.

3. They don’t know how to plan financing needs.

If a business is new or expanding, it needs adequate financing. However, that is not enough. Miscalculating and underestimating how much they need or want to obtain for the wrong type of financing can lead to business failure.

4. They do not anticipate or respond to competition, technology, or other market changes.

Assuming that it always works in the past would be dangerous. This is wrong thinking. Businesses that don’t factor in market changes, their competition, changing technology, or the value of experimenting with new ideas are likely to fail.

# 10 Lifelines That Could Save Your Business From Failure

  • Your business is struggling, it is easy to feel hopeless and see the glass half empty. But if you want to come back, you have no choice but to change your mindset.

  • A SWOT analysis is a strategic practice through which you identify the strengths, weaknesses, opportunities and threats to your small business.

  • Always focus on your clients. Understand your target market and ideal client.

  • Set SMART objectives and create a plan.

SMART stands for:

Specific: Clear enough to fully understand.

Measurable: Can determine when it’s complete.

Measurable: Can determine when it’s complete.

Achievable: Can be accomplished.

Relevant: Is connected to your overall game plan.

Time-bound: Has a deadline with specific dates.

A Smart plan can lead you to success.

  • To keep your business open, the most essential is to “trim fat”, or reduce costs. Start by cutting discretionary, or unnecessary expenses.

  • Manage your cash flow to run business smoothly without unwanted obstacles.

  • Talk to creditors, don’t ignore them. Good relations are the sign of healthy growth in business.

  • Organize your business and be ready for any challenges.

  • Stop wasting time on repetitive tasks.

  • Be aware about the market and develop your business according to market needs & customer desires.

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