In times of crisis or economic recession, financial distress is inevitable for most of us. It is mainly caused by internal factors such as poor cash flow management, or external factors such as a weakening economy, disruptive events, like the one that is happening currently in this time of the Covid-19 pandemic.
The faster a business can respond to it with a positive, strong plan of action, the better. If it fails, it may end up with worse financial conditions or go bankrupt. To avoid this scenario, there are a few ways a business should start implementing.
Identify the Cause of the Financial Crisis
The initial step to overcoming a financial crisis is to identify the main problem that caused it. There might be an internal factor, an external factor, or a global crisis – whatever it is you have to chalk out a permanent or long-term plan to overcome the crisis. For example, the external or global factor such as the Covid-19 pandemic, it is important for a business to identify the financial issues that it can improve after the pandemic impact subsides.
Cut Down the Nonessential Expenses
Analyze your business expenses and find out where and how you can cut costs. Identify the processes that cost you the most, establish good communication with your supplier, and ask them if there is anything you can do to get a discount or cheaper shipping fees. At the same time, remove time-taking and manual processes, which barely generate revenue. You should be more attentive while making purchasing decisions. For it, you have to set up a strong procurement and supply chain management team that can ensure the entire process aligns with the health of the current financial condition.
Change the Way You Budget
Tighten your company’s budget. In order to do it, you have to allocate the budget to the areas of your business that can increase your business profitability. One of the first things that a company should contemplate over during its financial crisis is to postpone any plans for expansion, events, or any other activities that require a lot of money. In order to simplify it, you can leverage the solutions of a financial app that you can integrate with your procurement and supply chain management. As a result, you can easily adjust the approval matrix, as you receive the budget requests from your multiple departments.
Monitor Your Business Cash Flow
Cash flow is the lifeblood of every business. Successful cash management is a challenge for a company to manage even under normal circumstances. It becomes much more difficult while dealing with economic uncertainty following this global pandemic of Covid-19. But, you have to manage your cash flow through minute-to-minute monitoring, adapting, and adjusting to the changing economy. For that, you have to invoice your clients on a timely basis, review your accounts receivable on a weekly basis and use a line of credit to fill the cash flow gaps, etc.
Change Your Sales Strategies
You have to evaluate your current sales strategies and find out whether they work or not. That way, you can figure out what you need to fix or change. For example, during a financial crisis of a company, it is its prerogative to know the quality of its existing prospects and evaluate if they are actually qualified.
Getting out of a financial crisis for a company calls for strong strategies and solid management resources that can ensure business continuity in the face of a crisis. Small and simple changes and adoptions to the new spending model can make a big difference.
Promise Training & Consultancy coaches corporate professionals with proven training solutions that can drive results, and take your business to new heights.