A financial crisis is every business owner’s nightmare. It can be caused by internal factors such as poor cash flow management, or external factors such as a weakening economy, calamities such as natural disasters or diseases, and many more. If you do not take immediate action when the financial crisis strikes, they will end up with worse financial conditions or go bankrupt. To avoid this scenario, there are a few ways you should start implementing.
1. Identify the Cause of the Financial Crisis
The first step to overcoming a financial crisis is to identify the main problem that caused it. It can be caused by internal or external factors;. Financial issues are generally an indication of a bigger problem. Therefore, permanent or long-term solutions are needed to overcome the crisis.
If your business financial crisis is caused by an external factor such as the Covid-19 pandemic, it is important to understand that your business’s financial issues may improve after the pandemic ends. The government has also prepared measures that include greater wage subsidies for all companies in Singapore.
However, if the financial crisis has hit your company even before the coronavirus outbreak occurred, more effort needs to be mobilized to restore your business financial stability. It is crucial to analyze your financial management. Have you been mixing your business and personal finances? How have you utilized your business profits so far? Have your customers always paid their invoices on time? Finding answers to these questions will help you find a better way to manage your company’s finances and figure out what works or what doesn’t.
2. Buckle Down and Remove Nonessential Costs
You should analyze your business expenses. From here, you can find out where and how you can reduce costs. Find out processes that cost you the most. There may be ways to cut these costs. Establish good communication with your supplier and ask them if there is anything you can do to get a discount or cheaper shipping fees (e.g. with a bigger down payment).
Reduce time-consuming, manual processes that are not profitable for your business. You’ve probably spent a massive amount of time and money on accounting tasks such as creating paper-based financial reports and invoices. Now it’s time to switch to an automated accounting system so that the accounting-related costs can be reduced.
You should also be more attentive when making purchasing decisions. Perhaps you have spent a lot of money for unnecessary purchases. Therefore, purchase requests from each department or business unit must be thoroughly reviewed. To make it easier for you to manage purchase requests, use procurement software that can be integrated with other business processes such as accounting and inventory management.
3. Change the Way You Budget
Your company’s budget should be tightened. Allocate the budget to the things that help increase your business profitability. Postpone any plans for expansion, events, or any other activities that require a lot of money.
To make it easier for you to budget, use a financial app that can be integrated with purchasing management. With this app, the approval matrix can be easily adjusted so that budget requests from each department or business location can be better managed.
4. Change Your Sales Strategies
Evaluate your sales strategies to find out whether they work or not. That way, you can figure out what needs to be fixed or changed. Review your promotions. Have they helped you generate profits or have they resulted in losses instead?
Know the quality of your existing prospects. Have they met your expectations? Are they really qualified? Now is the time for you to set your priorities on high-quality prospects. Thus, sales conversions can be accelerated.
You might also want to replace your marketing strategies with more efficient ones. As an example, you have probably spent a lot of money on billboard ads, now it’s better to focus more on digital marketing.
5. Monitor Your Business Cash Flow
Monitoring your cash flow regularly has never been more important. This will help you completely understand your business income and expenses. From here, you will be able to know your profit and loss, what is hampering your cash flow, and which expenses you can cut.
Your cash flow can be monitored anytime and anywhere with the help of a web-based accounting app. This app allows you to track income across departments and business units, and generate financial statements within a few seconds.
Make sure that you manage your customers’ invoices very well. Unpaid invoices lead to poor cash flow. With HashMicro’s e-Invoicing system, you can automatically send invoices, track all customers’ invoices, and send payment reminders to customers before they become due.
In order to get out of a financial crisis, business owners need to exert maximum effort. This may take months since it can’t be overcome instantly. By carrying out the five steps above patiently and optimistically, business owners will be able to get through and recover from the ongoing financial crisis.