Running your own business is rewarding, but it comes with various challenges, finances being one of them - especially when the geopolitical landscape has gone wild, and numbers aren't your thing.
Whether you are just starting your business or a seasoned business owner trying to navigate unpredictable economic times, handling finances for your business is crucial but can feel daunting. This blog post will share tips on managing your finances during economic uncertainty.
Create a Financial Plan
Creating a plan is one of the most effective ways to navigate uncertainty. A financial plan helps you forecast your business's income and expenses and make decisions influenced by the correct information. Knowing your short and long-term goals is a helpful place to start, from there, you can evaluate your current financial position and identify any risks your business might be up against.
Most accountancy software will allow you to run reports and track your performance, helping you make decisions at every stage. You'll see where you have opportunities to reduce costs and maximise your best income streams.
Have Financial Reserves
Setting aside a portion of your revenue to create financial reserves in anticipation of uncertain times is always good. Having a financial reserve can help you cover sudden expenses, unexpected costs, or a downturn in business. I recommend reserving three to six months' worth of expenses.
Stress-Test Your Business
Stress-testing your business means developing a set of scenarios and projecting what the impact would be on your business. Consider how these would affect your sales and cash flow. Knowing this can help you prepare for potential financial challenges and adjust your budget and marketing strategies appropriately.
Maintain Relationships
Relationships matter, no more so than in uncertain times. Doing what you can to keep in favour with your bank and suppliers will help you if you face an unforeseen situation. Banks are more willing to lend money to businesses with good credit scores. Similarly, good relationships with suppliers can help you negotiate better payment terms, discounts, and extended repayment plans to help you manage your cash flow.
Stay Up To Date
Finally, staying up-to-date on regulations and laws relevant to your business is always essential. However, avoiding costly mistakes might seem even more critical when the economy feels more difficult. A great bookkeeper will always keep you up to date on anything that will impact your business finances.
Conclusion
Managing finances during uncertain times can be challenging, but it is not impossible. By creating a financial plan, establishing financial reserves, stress-testing your business, maintaining good relationships with your banker and suppliers, and getting the support of an expert, you can navigate economic uncertainty and take care of your financial health. Preparing for the future is always more advantageous than reacting to it, so start planning your business's financial future today.
If you'd like to talk to me about how we can help, email me at tracy@grovevirtualservices.co.uk