9 Financial Management Tips To Navigate Your Businesses Through The Pandemic
The pandemic has posed an unprecedented challenge in front of businesses globally. Demand shocks, supply chain disruptions, lower propensity to consume have all acted against the interests of financial flourish. Financial management becomes imperative for businesses to remain afloat and utilise the unique opportunities presented by the Covid-19 crisis.
The following tips can guide small companies to navigate through these uncharted territories effectively –
Tip 1 – Boost Cash Position
Though profits are the measure of success, cash determines business survival. Therefore, the conversion of outstanding debt into cash is crucial for any organisation.
- Optimise day-to-day cash flow to get over any crisis.
- Keep accurate reports on the entire cash cycle to avoid payment delays.
- Refrain from paying suppliers a lot earlier than the agreed-upon terms.
- Keeping the line of communication open with creditors is essential to improve cash flow. This way, one can request temporary relief on loans.
Tip 2 – Keep An Eye On Costs
Remember, long-term and recurring savings are always better than short-term victories. Thus, ensure costs are consistent with the business requirements. Post that, focus on elevating the sales and gross profits.
Now, how to do it?
- Recognise business expenses such as maintenance cost and marketing, and try to keep them at sustainable levels.
- Keep a minute tab on costs and look for areas where you can make cuts. For instance, you can consider changing credit cards for lower interest rates.
- Evaluate the success of promotional activities. Scale how different marketing mediums are performing and cut back from avenues that are not generating substantial leads or ROI.
- Measuring staff arrangement against customer demands is one of the vital financial management strategies. For instance, you can consider substituting full-time employees with part-time seasonal hires during a slowdown.
Tip 3 – Don’t Mix Up Personal And Business Finances
Though one may have positive intentions in using personal finances to fund their organisation, it often complicates things. Having different bank accounts and books helps monitor cash flow effectively. Try to set separate budgets for personal and business finances and do not deviate from them.
Tip 4 – Invoice Discounting
One of the most practised financial management strategies is invoice discounting. Start-up owners can sell unpaid invoices to a lender against an amount, which is a percentage of the invoice’s value. Then, once creditors repay the due sum, businesses can forward the credit amount plus a service charge to the lender.
Tip 5 – Diligently Monitor Books
Daily assessment of expenses and tracking books open opportunities to handle finances effectively. This lets you spot discrepancies with numbers, leaving substantial room for addressing error before it costs a fortune.
Tip 6 – Manage Inventory
The key to satisfying customer needs effectively and simultaneously managing finances is proper inventory control. How can one do it?
- Utilise freed-up or unused capacity to maximise production and cut down batch sizes.
- Defer unwanted supplier deliveries, if feasible.
- Recognise issues in the supply chain and account for their cash impact accordingly.
- Prioritise orders that are likely to generate instant funds.
- Sell off out-of-demand products at a discount to free up space.
- Regularly review market demand and update forecasts to improve inventory.
- Opt for asset-based lending options.
Tip 7 – Set Up Payment Deadlines
Closely monitor payment deadlines for various business-related obligations, like paying credit card dues, loans, taxes, and utility bills. Late penalties often put businesses into a debt trap where they obtain further financing to clear existing obligations. It especially stands for growing start-ups, where every penny counts. Therefore, by paying bills timely, one can save enough to invest in various avenues.
Tip 8 – Redefine Business Model
In the wake of the pandemic, various companies redefined their business models to adapt to the new normal. Many shifted their operations online and restructured supply chains. Different B2C businesses have also forayed into digital marketing to improve their visibility among potential customers.
Even after the pandemic is over, certain trends that emerged in the last year will persist. Hence, consider re-evaluating your business model per the latest changes to manage finances now and later efficiently.
Tip 9 – Financial Planning For Upcoming Conditions
Followed by redefining the business model, strategic financial planning will be helpful to sail through this economic turmoil. One can suspend expenses like hiring workers if the situation is short-lived. However, if it extends for up to several months, individuals may have to re-evaluate business planning to minimise variable expenses, renegotiate fixed costs, and prioritise vital necessities for survival.
Businesses face varied kinds of challenges during their course of operations. Hence, no solution can fit all sizes. However, the points mentioned above can act as a guide upon which businesses can premise personalised financial management solutions to address their unique requirements.