Many business owners are in consensus that the hardest decisions to make in the business world are oftentimes financial. The gravity of these decisions has been made even more significant as the Coronavirus keeps rearing its head throughout the globe. This is because of the extreme long term effects that the disease has had on local and global economies. International financial markets have been on a downward spiral due to the pandemic, as it was reported that at the end of April, the Dow Jones (U.S) and the FTSE (U.K) got to their lowest points since 1987.
Businesses, small and large, have been hit the hardest by this economic recession. Reports of closures, downscaling, bankruptcies and layoffs have become synonymous with these tough times, affecting even well-established companies. It has therefore become necessary that business owners take some pre-emptive measures to protect their businesses from falling down the same hole.
But before any plan can be put in place, business owners have to first come to terms with this new reality. Some are yet to reconcile themselves to the notion that the situation is dire and calls for drastic measures. Even if some semblance of normalcy is restored today, the effects of this pandemic will reverberate a considerable time into the future. However, it is not all gloom and doom. Some astute financial decisions can be made to salvage the future of your business. They are discussed hereunder.
1. Seek government assistance
In response to the harsh economic times, local and federal governments have rallied around businesses to help safeguard their futures. Although the response varies from country to country, the aim is the same- to offer financial assistance to tide businesses over until the pandemic is suppressed. The U.S for example, has released a whopping $2 trillion to help keep businesses open and offer compensation to their workers.
Some governments are assisting their local businesses in the form of reduced taxes. They have offered waivers, deferrals and lower tax margins to mitigate the effects of a less-than vibrant economy. Other forms of aid include grants, stimulus packages and eviction and utility moratoriums.
Check for the eligibility of your business for any kind of government assistance from your local business council. It may involve filling out a form and waiting a couple of days but the assistance will be availed to you eventually.
2. Reduce your spending
While it is true that you have to spend money to make money, this is as good a time as any to try and reduce your overhead. Carry out an in-depth audit and identify unnecessary sources of financial drain. Anything that is not useful in the day-to-day running of your business is most likely superfluous, so you need to cut it out of your budget.
This is also not the time to be making irrational purchases or uncalculated risks that could compromise your financial position. Instead, direct your revenue into your business’ rainy day fund that will come in handy if the situation ever takes a turn for the worst. Saving will be made easier by the fact that your workers may be operating remotely, so utility bills may be at an all-time low.
3. Re-negotiate terms with your financiers
Since you may not be operating at capacity, your ability to make your loan payments on time may be reduced. Instead of defaulting on payments and ruining the rapport you had established with your loan provider, contact them and readjust your payment options. Most banks will be sympathetic to your condition as they are aware that it is as a result of the pandemic. Banks are usually prepared for eventualities such as these, so requesting them to reduce or defer your monthly payments and extend your loan period is not unprecedented.
4. Keep your revenue stream open
As difficult as it may be, try as much as possible to keep your business operational (without risking your life or that of your employees, of course). Although you might not be able to open up your business premises, offer your services remotely. If not, your expenses will quickly outweigh your profits; a recipe for insolvency. See to it that you do not lose any paying customers because they are your lifeblood.
You can diversify your operations by finding ways to integrate essential services to what you do.
5. Secure liquidity
In times of a financial crisis, cash is king. To overcome challenges associated with the pandemic, business owners should seek to liquefy their assets and remain solvent.
Some measures that can be taken to ensure that cash keeps flowing into your business are:
- Offer lucrative deals such as discounts to customers who choose to pay promptly and in cash.
- Review your cash-flow position regularly and re-evaluate your set measures accordingly.
- Turn some of your pending orders into cash. Prioritize larger ones because of their longevity in sustaining your cash flow.
- Create a cash-flow forecast that should include even worst-case scenarios.
Read Forbes’ take on cash flow and its effect on global economies during the Coronavirus pandemic here.
6. Assess your financial position
This should be the first step before implementing any other measures. It will make it easier to draft a financial road-map to prepare your business for the inevitable financial crunch. Your ability to stay operational, pay your debts, retain workers or qualify for any form of aid will be dictated by your current financial footing.
To ease the pressure of making decisions on you, put your financial advisor to the task. They are adept at gauging profitability and will offer you sound advice.
It is also prudent to keep proper documentation in the days to come, as it will be essential tracking the shocks that the pandemic will have on your finances.
7. Hope for the best but prepare for the worst
The most disconcerting part of a pandemic is the unpredictability. No one can say for certain how long it will last or give an accurate depiction of the aftermath. Therefore, you must brace yourself for even tougher times ahead. Bear this in mind as you make any money-related decisions. Stay informed about any drastic changes to legislation that may have an impact on your business.
No business is immune to the difficult economic times that have come about due to the pandemic. Therefore, every business owner should take any necessary measures to stave off the effects. Although these measures will differ from business to business, they should all be made from a position of knowledge. A detailed assessment should be undertaken before any plan can be laid down.
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