Owning and running a business is rewarding, but it also presents its fair share of hurdles, with financial matters often posing a significant challenge. This becomes particularly noticeable when the world's economic situation becomes erratic and numbers might not be your strong suit.
Whether you're a determined entrepreneur working to keep your small business steady or a well-experienced business owner adapting to the twists and turns of the current unpredictable economic climate, effectively managing your business finances remains pivotal, even if it seems overwhelming. In this upcoming blog post, I'll provide you with valuable insights to help you steer your financial ship through the waves of economic uncertainty. Drawing from my expertise, you'll discover practical strategies to take control of your business's financial well-being.
1. Create a Financial Plan
One of the most effective ways to navigate any kind of uncertainty is by creating a plan. A financial plan helps you forecast your business's income and expenses and make decisions influenced by the right information. Knowing your short and long term goals is a great place to start. From there, you can evaluate your current financial position, and identify any risks your business might be up against.
Most accountancy software will allow you to run reports and track your performance, helping you make decisions at every stage. You’ll see where you have opportunities to reduce costs and maximise your best income streams.
2. Have Financial Reserves
It is always a good idea to set aside a portion of your revenue to create financial reserves in anticipation of uncertain times. Having3. a financial reserve can help you cover sudden expenses, unexpected costs, or a downturn in business. I recommend aiming to have 3-6 months' worth of expenses set aside as a reserve.
3. Stress-Test Your Business
Stress-testing your business simply means developing a number of scenarios of what could happen in your business or in the economy and using these to project what the impact would be on your business. Consider how your sales, cash flow, and stocks would be impacted. This can help you prepare for potential financial challenges and make appropriate adjustments to your budget, stock, and marketing strategies.
4. Maintain Relationships
Relationships matter, even more so in uncertain times. Doing what you can to keep in favour with your bank and creditors (like your suppliers) will help you if you face an unforeseen situation. Banks are more willing to lend money to businesses with good credit scores and a proven track record of making payments on time. Similarly, good relationships with suppliers can help you negotiate better payment terms, discounts, or extended repayment plans to help you manage your cash flow better.
5. Stay Up To Date
Finally, keeping up-to date with regulatory and legal changes which effect your business is essential at all times, avoiding costly mistakes can seem even more important when the economy feels more difficult. A great bookkeeper or accountant will always keep you up to date on anything that will impact your business finances.
In conclusion, managing business and personal finances during uncertain times can be challenging, but it is not impossible. By creating a financial plan, establishing financial reserves, stress-testing your business, maintaining good relationships with your suppliers, and getting the support of an expert bookkeeper and/or accountant, you have the best chance of navigating financial uncertainty and taking care of your financial health.
Preparing for the future is always more advantageous than reacting to it, so start planning your business's financial future today!
If you’d like to talk to me about how I work with small businesses like you, email hello@abcsuk.com today and book in a discovery call.
