An economic recession is looming large on the horizon in the wake of COVID-19 pandemic and many businesses are already encountering severe financial crisis. As the authorities all around the world are enforcing strict rules and restrictions to curb the disease, entrepreneurs are growing more and more concerned about business continuity and survival. And, needless to say, until the issue is resolved the days are going to be increasingly challenging. In such dire circumstances, businesses need to understand their financial position and develop sound crisis management strategies, anticipating multiple possible scenarios, at the earliest to minimize their losses. There are glaring evidences of business failures due to financial crises in the history of mankind. The causes of financial crisis may vary but without a fair idea of how to navigate through the crisis, liquidity problems can force the companies out of the business. Running a business is always a challenging task, no matter how robust your business model is. Setbacks and challenges keep coming but a financial crisis could be one of the most damaging things.
Here are 6 steps to managing business finances during crisis:
- Analyze Multiple Possible Scenarios
It’s indeed difficult to predict when the pandemic is going to end but you can prepare your company for every possible outcome. Anticipate the best as well as the worst case scenario, along with everything in between and plan for financial crisis management. Your revenue, payments, and cash inflows could be severely affected. Create cash flow projections, considering different possibilities and have a financial crisis management strategy in place to deal with them so that you’re not clueless when your business requires a good action-plan to stay afloat.
- Consider Alternate Revenue Sources
The world is adapting to a new lifestyle, personally and professionally, amid the COVID-19 crisis and this could open up new business opportunities for you. If your existing business structure and processes aren’t generating revenue, try changing them to create products and services that suit the ongoing circumstances. This would help you not only in surviving in this difficult times, but also in evolving and exploring new business ideas.
- Rethink Your Expenses
This is a good time to reflect on your ongoing expenses and cut down the unnecessary ones. Cost-cutting is important in times of crisis, but you also need to carefully analyze the requirements of your business. Technology has evolved in colossal ways to automate a huge number of routine or repetitive tasks. Identify the essentials and eliminate the excess. Surely, this would mean taking some stern steps and leading the business through some major transformations but all the efforts would ultimately help you keep the financial health of your company in good shape.
- Settle Your Debts
Debt settlement is a huge problem in times of financial crisis. Before the situation worsens, assess your cash position and develop a plan for repayment of debts. Maintaining a cash-flow balance is imperative during crisis. However, your repayment plan needs to be carefully thought. Even if it seems that you can clear all your debt today, it may not be a wise decision. Paying more than what you are earning could lead you to trouble. If required, do not hesitate to ask for extension.
- Strengthen Your Business Relationships
In business, mutual support is crucial, especially in times of crisis. Amid this global pandemic where people all around the world are suffering in some way or other, try to build good professional relationships with clients and associates. Launch special offers for helping your clients during this difficult time. You can future proof your business to a great extent if you can earn the loyalty of your customers.
- Safeguard Your Cash Flow
Cash flow is extremely important to keep the company alive. As long as the cash flows in and out in a balanced manner, you can devise methods of solving problems, and keep things going. Explore new options to maintain the cash flow. Offering early payment cash-backs could be helpful as well. Safeguarding your cash position can help your company survive any financial crisis.
Taking these steps can help you get through the financial crisis that COVID-19 pandemic has invited. However, there is no sure-fire solution for financial crisis and all that matters is making smart decisions, understanding the position and functioning of your co