For many business owners, phases of uncertainty and troubles will arise.
The responsibility of owning your own business and maintaining success can have its ups and downs, leading to times where your financial situation can reach a critical point and further challenges arise.
This situation is something no business owner should have to face, but analysing your businesse’s financial situation is critical to help get back on track. However, within this process you will have to proceed with tougher decisions and actions, but this is something you shouldn’t hesitate about. Analysing the problems quickly enough can help reduce the struggle.
- Analyse who you are paying & when
- Cutting or minimising
- Don’t leave your creditors out
- Don’t overlook organisation
When analysing your business costs, you need to take into account each and every outgoing you have. From this, you will then be able to see a trend in costs that may not be as necessary as you originally thought.
Look at areas such as simple expenses and any other outgoings that may be currently not as important compared to others, or could be held until you reach financial stability again. For example, due to the current climate with the COVID-19 pandemic, many business owners and employees have adapted to working from home, which means your business premises are being left unattended. This could lead to questions, such as –
- Is this something I could negotiate with the Landlord to reduce or stop payments?
- Does remote working benefit my business?
- Could I adapt to a smaller working premises and reduce my overall rent related costs?
- Could I focus more online?
Contributing factors such as the four above can help you shift your mindset to focus on what will work best for your business in the future and what quick changes you can make immediately to help you during the present.
Again, focusing on the prioritisation of your outgoings. You should analyse the importance of your individual payments.
If you find yourself owing an amount of money that is currently above the amount you currently hold, then you need to see which payments become mandatory.
When looking at the order of importance, you need to firstly look at any obligated payments that are capable of shutting down your business if left unattended, as these are the primary threat to your business.
From this, you need to analyse each aspect. For example if you fail to pay an employee, they may decide to find another employer who is able to pay them, resulting in the halt of production and your business not running properly. This should help you see your employees are the top priority in this situation.
Another crucially important area you need to focus on alongside the importance of your employees, is how crucial each of these payments are. For example, if you do not provide a tax payment on time, this could lead to fines.
When focusing on the cutting/minimising phase on your costs, the first thing you need to do is remove any discretionary expenses you may have. Then, you need to analyse all of your ‘non-person’ related outgoings, for example, you and your employees may still require to travel due to your working circumstances, but could this be something that is adapted to reduce costs?
If you find you have already touched on these decreased outgoings due to your new remote working lifestyle, then an unfortunate consideration could be either reducing the hours or compensation of certain employees, or laying them off altogether. This is something that will be difficult for any business owner, but the realisation that your business would work the exact same with fewer employees could be the main contributing factor to guaranteeing the future success of your company
As a business owner, you may have the temptation to ignore the situation and hide yourself when the topic of owing money arises. But this is one of the biggest mistakes you could make.
Many finance professionals will still be interested in helping you, if they believe you will settle in the end.
For example, if you find yourself owing money back to a bank and you know this isn’t achievable, then still make sure you are in contact with your banker about the realistic situation. Your banker’s main focus is to receive the money they’re owed back, so if you pitch a good, stable plan to them to turn your situation around, they will still be likely to work with you and adapt to your situation.
If you don’t maintain a good level of organisation as a business owner, then it will lead to difficulties, especially with your finances.
Looking back at how you have reached the current situation you are facing could be contributed by the lack of organisation you were putting into your company.
Taking the time to keep all of your company orders in place can provide a more positive effect to your company as a whole and will relieve a significant amount of stress, which could have been contributing to ineffective work output beforehand.
While you are taking the time to see what you need to do to improve your business, take that time to set yourself organisational goals that you should focus on at certain times. This technique will not only help you in the long run, but will also increase the productivity you provide to your business and ensure fantastic work is constantly being maintained by yourself and your employees.
If your business is struggling, these tips will help you effectively analyse and prioritise certain areas your business needs focus on. But action needs to be taken as soon as possible, don’t delay and take action.