If you are suffering through financial crises in your business then learn how to overcome financial crisis in business in the article detailed below.
Financial crisis in business doesn’t just affect our financial well being but also our emotional one. So, it is crucial that we come out of the crisis intact. It is easy to think ‘I should have done this or that’ but what you need to do is think about the future and find ways to tackle the problem. To do that, you have to find out what you owe and the available resources to overcome that.
- First and foremost, how much do you owe? Make a comprehensive list of all the people you owe. Include the amount that you owe and whether it is secure or unsecured ones. Needless to say paying off secured loans should be top priority. Do not omit anyone even if they are friends or relatives or even if the amount seems trivial. Also make a separate list of the late fees and interest owed on the amounts. You might be able to negotiate a reduction on this.
- What are the sources of income? Include all the income – freelance work, second job, alimony, child support and anything else you can think of. From this amount deduct taxes, health insurance and retirement contributions. What you are left with is your gross income.
- Next come to the expenses. They can be sorted into two. Essential expense include food, child support, alimony, mortgages while non-essential expenses include credit card payments or other personal loans.
- Determine your working budget by deducting essential expenses from your gross income. Whatever is left can be used to payback unsecured loans.
These ideas will help you out if you are running a very small business or it is a one man show. For a larger business a slightly different approach is required.
- Work out a communication plan as you want to make sure that it is information and not misinformation that is spread. Make sure someone has the answers to the questions put by media and someone is on hand to reassure the investors that the problem is being tackled.
- Work out the cash flow for the next three months. This way you can plan on when the cash will come and where and how it has to be spent. This will also help you in avoiding unpleasant surprises and you can plan ahead for contingencies.
- Develop a plan for cost reduction. Even with the knowledge of your cash flow there might come a time when you are short of cash flow. But, if you wait for that situation to arise before acting on it then you will be too late. It is best to come up with a plan before such a contingency arises. Create a cost reduction plan that can be put in place quickly. Key questions that you should ask yourself for this include – which vendor should get priority, should there be a freeze on disbursements, reduction in salaries and revising payment terms with creditors. Now plan accordingly and put that plan into place.
- Try to make you customers to pay faster. Nothing can boost cash flow like an inflow of cash. Put a plan in place to make your customers pay you what they owe. You can encourage them by giving them a discount if they make the payment faster or having a reward plan in place. Many wireless companies follow this policy all the time. There is no reason you can’t model it to your requirement.
- Reorganization may also have to be considered as an option. It is better to bring in outside people to help you in evaluating whether it is needed.
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