Financial crises could be severely damaging for your business. A financial crisis can arise in the most unexpected times, even if the businesses have taken enough safety measures to avoid it. There are several factors that contribute to financial crisis in an organization like broad market factors which include overpriced assets and excessive debt built up in a financial system, or financial stress in a specific industry or company due to various reasons. Also, the highly competitive and rapidly evolving market these days gives way to unexpected loopholes in the implementation of financial and corporate strategies, leading to financial setbacks. However, once your company is in a financial crisis you need to use the right strategies to deal with it or it can bring downfall to your business in no time.
Here are a few strategies that you can adopt in times of financial crisis to save your company from irreversible losses:
- Cash is the Savior
Company balance sheet contains different types of assets which help you grow the value of your business and build equity. But in times of financial crisis, it often becomes very difficult to sell those assets and convert them into cash. However, in difficult times, what a business needs the most is quick access to liquidity. Thus, it’s important to keep abundant cash in hand to survive a financial crisis. Avoid over-committing your cash and keep a good portion of it saved for unexpected financial crisis.
2. Cut Down Extra Expenses
In times when the company’s financial condition becomes stressful, it’s critically important to review your income and expense statements thoroughly. Find out the areas where you can cut down expenses, even if it is a small trimming. However, that doesn’t mean that you lay off your key employees, abandon a prime business location, or make decisions that might hurt your business in the long run. This is because as soon as you come out of the crisis you would need them to resume the normal functioning of your company. Focus on temporary and judicial cost cutting to save resources.
3. Take Care of Your Core Business
Exploring new ventures and ideas for your business is fine but that shouldn’t mean ignoring your core business. Many business owners get involved in ventures which are entirely different from their core business. Make sure that whatever business is helping your company sustain well needs to be cared for. New business ventures could help you buy assets but your core business will help you maintain the liquidity. Business owners ignoring this fact often end up selling their assets for less than their actual worth.
4. Clear Your Debts
Look for ways to clear your debts quickly. For this, you may require to sell products at discount prices, put your private properties under mortgage or take loan in order to collect cash. Your debts may cause serious issues in times of financial crisis. You can hire a professional who can assess your company’s financial state and help you make smarter moves. In business, as soon as your company has sufficient funds, start clearing all your debts. This may also lead you to some extreme measures like firing people, but will help your company survive in times of financial crisis.
5. Reorganize Operations
You may need to reorganize things and operations to overcome the financial stress and make the team stronger. Find out what is lacking in the existing procedures and how things can be restructured for better. You can hire a professional to audit and reorganize your business. The market is continually evolving and you might need to change your ways to stay ahead of the competition or you may lose your revenue stream.
6. Boost Your Customer Base
To handle financial stress, the most important thing that you need to do is maintain the cash inflow. Evaluate your current business strategies and implement new ones to boost your customer base and retain customers. Also collect outstanding payments owed to you. Your accounts receivable might be hiding a lot of cash which could help you boost your cash inflow.
Financial crises are indeed worrisome but you shouldn’t panic. Keeping in mind these strategies will help you overcome the crisis and avoid organizational downfall. Also, whether it is a small or big establishment, businesses should always have plans in place to combat unexpected financial stress.