When the local or global economy enters a time of uncertainty, it is understandably a worrying time for business owners. However, with due diligence and proactiveness, there are methods you can adopt to manage your finances and stay above water during turbulent times. Read on to discover more.
Reviewing and Amending Your Business Plan
When business conditions change, it is recommended you revisit your business plan and make amendments to reflect the present circumstances. For instance, you should evaluate performance and incorporate strategies so that you can find a way to improve your performance by amending budgets and forecasts. That could also mean you have to re-evaluate business practices like banking. In times of uncertainty, it could be the best time to change to a quick and easy banking method, in which you can have business support from your phone, obtain a prepaid business credit card, and automate your admin.
Obtaining Loans and Investments
During unprecedented economic collapses, your business finances will naturally be at the forefront of your mind. If things are becoming dire, it is time to consider taking out a loan or gaining more investment for your business. You will probably have gone through the company funding stage when you first set up your business. So, at least you will be better placed for a second-round of funding. By receiving an additional injection into your funds, you can use the cash for keeping your business operations afloat. Just make sure you do your sums first, so you know how much you require to keep your operations going and how and when you will pay loans back. In extraordinary uncertain circumstances, you may also be able to receive a loan from the government.
Improving Your Cash Flow
Loans are often the last resort for financing during uncertain times, though. You should first try to reduce your reliance on external finance. You can do that by increasing the productivity of your existing assets and employees, and by improving cash flow. By improving your cash flow, you can free up money to fund vital investments and purchases without having to obtain external finance. Improving cash flow allows you to pay down debt more easily. Ways of improving cash flow include:
- Following up outstanding debts
- Preparing regular cash flow reports
- Reducing stock levels and replacing the slow-moving stock
- Prioritising your marketing for services and products that can be quickly turned into cash
- Selling unnecessary assets
Adopting Risk Management Strategies
In uncertain times, your business can be exposed to risks that threaten its survival. You, therefore, need to develop appropriate risk management strategies for several scenarios. By having risk management strategies in place, you can reduce risks like:
- Relying too much on a single supplier
- Relying too much on a small number of significant customers
- Relying too much on one type or source of finance
Reviewing Your Business Costs
If a company cannot control costs or if it passes increased costs onto customers, the company’s cash flow and profitability will become reduced. So, in uncertain times, you must review your cost structures so you can create savings. For example, you could potentially ask suppliers for discounts or change the delivery method in order for your business to reduce warehouse costs. Owners can even switch business energy supplier and try to get the best rates possible. It is also advisable to compare your cost structures to other businesses in your industry so you can identify areas of improvement. Although it is vital to cut costs in uncertain times, you do not want to be too aggressive in your cost-cutting, as that could be detrimental in the future.