Unexpected Financial Hurdles – How to Keep Your Business Prepared?
Financial management in a company is very important for its effective functioning and profitable revenue. But, sometimes a business has to face some unpredictable situations like loss of key players or a sudden rise in insurance premiums, which hits the business financially. It is important to handle these situations effectively so that the business can steer clear from debts and bankruptcy.
Common Unexpected Hurdles and their Solutions
Solution – Creating internal KPIs to manage financial health
Maintaining a managerial discipline is very important to achieve balanced cash flow. To prepare your business against any financial hits, structure Key Performance Indicators and guidelines internally, to keep a check on the financial health of your business. It is advised to divide your monthly net cash flow into three categories – reserve capital, growth capital, and working capital.
1. Unpredicted financial hits
2. Issues related to monthly financial commitments
Solution – Clear your credit card debt. Your monthly budget is greatly affected if you have credit card debt as the interest charges take a toll on your financial management. Getting rid of this interest payment can give you more opportunities to focus on other commitments and will reduce most of your financial burden for the month.Â
3. Unforeseen scenarios Solution – Access possible situations beforehand and create plans for the same. When your business is in a growing phase, there is always a little unpredictability involved with finances. Hence, it is advised to analyze various possible scenarios beforehand and create multiple financial forecasts to deal with them when the time comes. Always prefer being under budget than over, when planning.
4. Financial requirements in the times of need
Solution – Create and retain strong business credit.
If you have a solid business credit file, you can easily apply for funds in case of any emergency. It is very important to plan for situations, like an urgent need of cash or reduced income, to fill orders and pay your suppliers. Maintaining business credit increases your credibility and helps you in the long run.
5. Insufficiency of cash flow Solution – Maintain good relations with lenders. You can develop lender relationship by paying a small amount of credit when your cash flow is positive. Do not implement this idea when your business is unprofitable and requires capital. Implementing insurance policies for the business and initiating an auto-pilot recession plan can save you in times of cash flow shortage.
6. Unprofitable or unemployed period Solution – A backup budget always helps.  In case of any crisis, it is important for a business to be ready with a backup budget. A fallback budget must be planned well in advance so that it can be effectively implemented if the time comes. Make this budget leaving out the things you can do without if necessary.
Outsourcing can be a great option if you want your finances to be managed cost-effectively. Join hands with Cogneesol, and let us help you by providing , online bookkeeping services, cash flow management, and much more.
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