After reading this article, you will learn about 13 priority actions, each of which, if deliberately performed, can keep your business afloat during the storm.
Priority for business
In business, money and cash flow are like oxygen: when the influx of working capital decreases and the business begins to spend inventory, the “oxygen” of the business is consumed, and survival directly depends on how quickly you restore cash flow sufficient to pay current operating expenses. The slightest delay in solving this problem, or the hope that things will get better on their own, will cause a guaranteed long and painful death for the business.
You must be able to pinpoint the necessary actions to ensure survival. The faster you find a solution to restore the vital functions of a business, the less loss you will incur.
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The business rescue plan must be thought out with a margin.
Although all business problems need to be addressed, the highest priority is to determine a detailed and specific plan for working with finances. Namely: determine the required amount of money, ensure the flow of money to the company, and create reserves in case of deterioration.
13 Mandatory Financial Actions During a Crisis
Below are the 13 most important key performance indicators (KPIs) and critical factors needed to run a business during a crisis.
- Know and efficiently manage current cash balances.
- Keep track of the amount of receivables that can be collected quickly and develop a plan to collect overdue receivables. In cases of detection of overdue accounts receivable, take measures to collect them as soon as possible and prevent the occurrence of delays in the future.
- Forecast cash flow from operations, assuming that the economic situation remains “as is” for 3 – 4 months. Identify and, if necessary, quickly adjust the sources of income and the expected costs of servicing this income. In this case, specificity is required.
- Know the actual and projected rates of spending money (these are your fixed total expenses – weekly and monthly).
- Know your monthly variable and fixed costs. It is also important to know your break-even point without depreciation (because depreciation does not require money).
- Identify all recurring payments (loans, rent, payments to suppliers) that can be moved or deferred. Study the law on credit holidays.
- Identify sources and opportunities for additional funding. In other words, analyze the possibility and feasibility of a new loan or injecting your personal funds into the business. But you should not make the mistake of a “casino player” when irreparable expenses are made in the desire to recoup.
- Analyze any unused business assets that can be monetized.
- Assess how much it is possible to reduce the withdrawal of money from the business for personal needs in order to keep cash for the business.
- Analyze directions and projects and abandon unprofitable ones. Review advertising and promotion spending and eliminate unproductive activities that do not bring measurable results, such as image advertising or advertising for reach and recognition. It is better to replace it with advertising with measurable effectiveness, built on the principles of direct response and control results.
- Review planned investments for development and growth until there is stability in the business.
- Analyze all the changes that have been made and the results that have been achieved.
- Familiarize the team/employees with the plan for overcoming the crisis. If employees don’t know what’s going on and you pretend everything is fine, your credibility as a leader is undermined.
List of actions you can take to keep your business afloat
If you can’t come up with a plan that will keep your business viable for the next 3-4 months, get creative with your actions.
- launch partnership projects and promotions;
- activate word of mouth marketing (clients by recommendations);
- work out a list of clients, including those who applied but did not become clients;
- change your proposals to fit the new reality;
- modify scripts and train the sales team in alternative sales methods such as consultative sales, etc.