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Today, I have a great article written by Good Nelly, she has a background in finance, and today will talk about How to Manage Business Finances Efficiently During Uncertainty. Enjoy!
You put in lots of hard work when you start your small business venture. And, it is disheartening if you don’t get results as you thought of.
However, when you start a business, you have to keep in mind that ups and downs are common in any business venture. A small business often witnesses hardships. It is quite natural that you will be worried about the future of your business and how you can make it survive in hard times.
We all are going through uncertainty. Many small business owners had to lay off employees since they could not visualize any positive aspect of their business.
About 60% of respondents reported to lay off at least one employee due to the pandemic situation.
At the end of the first quarter, about 31% of the respondents said there’s a chance of going bankrupt or out of business in the next six months.
During that time, many non-essential businesses had closed or reduced business hours drastically.
Let’s discuss how you can manage your small business finances during uncertain times.
1. Have clear knowledge about financial basics
Yes, knowledge is quite important. Trust me; you can make your business flourish if you learn the financial basics. You have to love the numbers and know exactly what you need to do during difficult situations.
So, gather knowledge about balance sheets, personal financial statements, accounting ledger, income, and cash flow, along with supporting documents for tax preparation, insurance, and so on. If required, take the help of an experienced person to learn the basics.
2. Keep a track of your income and expenditure
Just like you manage your personal finances and analyze your income and expenses to plan your budget, likewise, keep track of your business income and expenditure. It will help you plan your business budget to keep your business debts in a manageable condition.
Small business owners often have to do this single-handedly.
Nowadays, please track your expenses in a spreadsheet. You can browse through and use online software to do so.
3. Focus on your priorities and support your employees
Yes, you will have to be clear about your priorities.
One suggestion, if you have employees, give them support during this tough time. It is important to see that your employees and their families are safe. It would help if you looked after yourself and your family members, too.
If you support your employees during this time, they will offer you support in times of need.
Communicate with your employees regularly. Proper communication can help your business run smoothly even if your employees are working from home.
4. Prepare yourself for multiple outcomes and adjust your strategies
As a small business owner, you will have a vision for your business. However, be ready for multiple outcomes as everything is not under your control. For example, no one knew about such a pandemic situation. So, be prepared and don’t take a risk that you can’t handle. It is better to take manageable debt.
It is advisable to be prepared for multiple outcomes that you can control. Also, motivate your employees and be hopeful.
Do a survey and try to predict the market demand soon. Likewise, focus on improving your products or be ready to provide such services.
Sometimes, you may need to adjust your strategies to keep your business running.
The experts always advise you to do the SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis of your business from time to time.
5. Have an emergency fund and secure money at multiple locations
I am sure you must be having an emergency fund for your business. It is perhaps a pre-requirement of starting a business. However, having an emergency fund is not enough.
Then, what do you need to do?
First, do you keep your money in one bank? If so, what will happen if there’s a scenario that impacts a whole county or a city?
Therefore, make a smart move. Keep money at multiple locations, and it should be highly liquid so that you can take out cash immediately during uncertain times. You won’t be dependent only on one savings account.
6. Opt for a business interruption insurance
You must be having insurance policies for your home, car, along with health and life insurance. You need one for your business, which is termed business interruption insurance.
Why do you need it?
It will help you cover the lost income and pay for extra expenses during uncertain times when there is a business closure for a few days. This insurance is a part of your business owner’s insurance policy. It can help your business to recover from a loss.
However, just like other insurance policies, there’s a coverage limit. Financial losses more than the limit are entirely the business owner’s responsibility. Therefore, assess your requirement well and purchase the required coverage.
For example, if you have a business set up outside your house, is the building covered under your insurance policy? Is the property in a flood-prone area? If you have your business set up at your home, will it be covered under your home insurance policy?
Therefore, it is better to take the help of an insurance agent, assess your needs, and opt for the required coverage. Simultaneously, do not get panicked and pay extra to buy coverage that you don’t need.
7. Do not mix your business accounts with your personal ones
No matter how tempted you feel, do not use your business credit cards for your personal expenses. If you do so, you will have difficulty going through the statements and differentiate between your personal and business expenses every month. Moreover, keeping accounts separate will also help you in your tax calculation.
When you strictly use separate cards for business expenses, it also helps you easily calculate your business expenditure.
8. Manage your business debt and keep it at a minimum
It is always advisable to keep your business debt manageable. However, at times, if you’re not able to make payments, communicate with your creditors and explain the situation.
Proper communication can help you to find ways to reduce your debt and manage it efficiently.
When you communicate with your creditors and explain your situation, many creditors will appreciate your honesty and work out a suitable repayment plan for you.
I want to conclude by saying that you should also manage your personal financial situation to overcome financial uncertainty. Plan a realistic budget and manage your debts and expenses like a pro. It will keep you stress-free and help you to manage your business efficiently.
Author’s Bio: Good Nelly is a financial writer who lives in Milwaukee, Wisconsin. She has started her financial journey long back. Good Nelly has been associated with Debt Consolidation Care for a long time. Through her writings, she has helped people overcome their debt problems and has solved personal finance-related queries. She has also written for some other websites and blogs. You can follow her Twitter profile.