Business finances are one of the biggest challenges of entrepreneurship. Running a small business means managing money, and being great at one doesn’t always translate to being great at the other. A person can have a very successful business that has no cash.
Managing the money is a beast all of its own, and if you throw a crisis in the mix, even the most successful business can crash and burn. How do you keep a business afloat in the midst of a financial crisis?
What Is a Crisis?
It can help first to differentiate between being in trouble and being in a crisis. Being in financial trouble is what happens when poor money management during times of non-crisis caches up with you.
The kind of crisis we are talking about is when you have to learn to manage finances in the midst of a natural disaster, fire, theft, or the unexpected loss of significant income, such as the loss of a major contract. Even if your money management skills during regular times are stellar, you will need to make some adjustments during a time of crisis.
Decide the Best Course of Action
The best thing to do is to plan ahead for these things to happen. Something unforeseen will happen during the course of your business. You cannot predict a devastating tornado, fire, or embezzlement by a dishonest employee. When these things happen, having a plan in place can make all the difference.
Back up files and store them offsite. Have funds in savings to pay a few months’ worth of bills if you have to close down for a short time and are not bringing in revenue. If savings isn’t possible right away, have a line of credit in place to handle cash needs if a crisis occurs before you can build up your savings. Get insurance.
If a business crisis hits and you are not prepared, there are still some options. You basically have to go into survival mode. Cut costs and reduce expenses where ever possible. Sell off any unneeded assets to free up cash. Consider factoring accounts receivable, and be certain to file insurance claims as quickly as possible if you have insurance.