Financial problems will seriously damage a business if not dealt with quickly and correctly. Due to the ever changing nature of the markets, companies are still at risk of being in debt, even with preventative measures being taken. Even if you tried preventing them, due to the state of the market and prices of resources, you might go into debt. However, once problems arise, it’s crucial to know how to relieve financial stress and resolve issues in the best possible way.
According to the Bureau of Labor Statistics, about two-thirds of business survive for at least two years, half of all businesses will survive five years, and one-third will survive for 10. There are multiple factors that can lead a company into financial stress, and there are multiple ways to lead them out.
Below are three ways to help your business alleviate its financial stress.
When at a difficult crossroads, businesses can facw’ tough decisions when it comes to their overall organizational and staff management strategies. In such situations, there are typically three options:
1. Cut staff
2. Restructure and cut expenses with minimal to no layoffs
3. Total shutdown (or sell the company)
The first and third options are extreme measures that won’t necessarily solve the problem and allow a company to operate efficiently. A decision to restructure comes with difficult meetings and often involves a complete overhaul of your strategies and execution processes. It requires certain changes to be made that will yield positive results in the long run.
When restructuring, you’ll want to hire project managers to oversee production and decrease margins of error within your organization. Senior members of your team may seem like the cost-efficient option to oversee other team members and projects, but they may not be adequately equipped or experienced enough to plan and execute new strategies. Hiring an experienced project manager will bring in someone with expertise to improve efficiencies and increase revenue and/or profitability.
These changes will create a need for a project management system that best suits your company’s workflow. Some companies combine different pieces of project management systems, but this doesn’t allow them to accurately analyze data, report on that data, and utilize it to drive improved daily workflows and a stronger overall bottom line. A complete and unified system not only allows companies to see all workflows, tasks, processes, approvals, and time spent on those tasks, it also allows them to create accountability measures, improve revenue and profitability, while decreasing overall margins of error.
Employee training is another process that needs to be standardized and structured for long-term success and lower costs. By creating a comprehensive training process on the front end, the amount of time from on-boarding to production can be limited, and critical errors that occur from inadequate training can also be minimized.
Rushing through training to get your employees “hands on” as quickly as possible can have serious side effects, not only to your business’ performance, but also for your employees’ confidence and propensity to continue learning or (even worse) continuing to work for you. A comprehensive training program in the first few weeks is crucial, but companies also need to keep a close eye on continued performance-based training to ensure employees get the help and knowledge they need in an ever-changing business environment.
Improve your financial management
Having a handle on the intricacies of your company’s finances is crucial to its long-term success. Companies can struggle even when hitting their sales goals because of poor financial practices. Business owners often make common financial mistakes, such as incorrectly pricing their offers, taking on too much debt, or poorly managing their cash flow.
Understanding the reasons why most businesses suffer from financial problems can help you take steps to avoid them and deal with any problems that arise.
Few businesses can escape cash flow problems, but it’s not impossible. According to a U.S. Bank study, a whopping 82% of businesses that fail do so because of cash flow problems. Remember, cash flow doesn’t just mean the money flowing in and out of your business: you have to take the timing of those flows into account, too. Cash flow is affected not just by bringing in more capital, but also by limiting your outflows. This involves manage your expenses just as much as your sales. Stay on top of your customers’ payments and your collection of outstanding debts, and make sure you manage any excess inventory as well.
You’re going to have expenses to pay regardless of your business’ size. The key is keeping these expenses organized. Make a list of payments you must make each month and organize them according to priority. Include everything, no matter how small. Determine which ones are urgent, which can be paid later, and which that can be eliminated entirely.
Every company has unnecessary expenses, but the moment financial problems show up, they turn into dead weight. You can regulate this by looking for cheaper suppliers and resources, or by negotiating a better deal with your current suppliers.
Collecting debts owed to your business is important, but so too is paying debts your company owes others. If you’re facing creditors’ voluntary liquidation and deregistration, look for the fastest available means to pay your debts. You’ll have to consider taking loans, mortgaging your private properties, or selling products at discounted prices to collect money quickly. Any inability to pay your debts is a serious issue you must address the moment it shows up.
If you can’t deal with these issues alone, hire an accountant who can perform an assessment and advise you on your next move. The moment you get some funds, pay your most urgent debts, and continue so until you’re able to cover all your debts. This may also mean you’ll have to take some unpopular measures, like firing people, but it will help your company survive and preserve other jobs.
As companies grow and their processes become more complex and comprehensive, it may be important to look into technology solutions, like an enterprise resource planning (ERP) system to organize, automate and streamline financial management processes from one end to another. These systems provide long-term value and ROI across multiple parts of your business.
Maintain and grow your customer base
One key driver of your company’s value is the value of its customers. Analyzing per-customer profitability and maximizing customer lifetime value are highly important and essential to any business.
To increase your customer base, it is necessary to stay in constant contact with potential and existing customers. The more value your business can offer, the more likely your customers will remain loyal.
In order to keep customers happy and encourage them to come back, keep your lines of communication open. Customers who contact support about their first order are just as important as customers who contact customer service about their tenth order. Treat each customer with respect and take appropriate action for each situation. A happy customer is likely to tell at least three friends about a positive experience. It’s clear that great customer service leads to increased sales.
Customer retention is important, but gaining new customers is another way to combat financial stress by bringing in more money. Digital marketing may be a large part of every business’ strategy, but that doesn’t always mean you need to hire an expensive agency to run campaigns for you. If starting small is the plan, strive to keep your business’ website content and social profiles up to date. Be sure to stay in touch with consumers on social media, as a study shows around 71 percent of customers who have pleasant experiences with brands on social media platforms will share or recommend the brand to their loved ones.
Don’t despair when faced with financial troubles. Look for the most agreeable and appropriate solution for all parties involved. To dodge any big damages, have contingencies in place which will help you deal with financial issues in the future. It’s important to prevent problems and difficulties from happening again, since recovery might not always be an option.