Here's How to Manage Your Company During Financial Crisis

To run the business effectively, a business owner has to keep the tab on the regular transactions and understand where the company stands financially
  • BY Jaspreet Kaur

    Feature Writer, BusinessEx

  • |
  • Jul 17,2020
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  • 12 Mins Read

Pandemic and economic slump are two blows faced by the companies presently. This has begotten several problems such as small margins, shrinking cash reserves and stagnant markets. Thus, it becomes vital to analyse and leverage the financial backdrop of small organisations. 

Although, the present situation requires a quick action plan; creating an instant financial health strategy is daunting. Understanding these needs, here is a list of ideas to safeguard the company and keep the side effects of downturn at bay. 

Assess Company's Creditworthiness 

At the time of slump, companies seek monetary help from external sources. A loan can help the company row the sea with less or no damage. To calibrate whether the company can take credit from banks or private lenders, it is imperative to test its creditworthiness. For that, the entrepreneur has to know the credit score of the organisation. If there is a sole entrepreneur of a certain company, then there would not be much difference in personal or company's credit score. However, if there is more than one business owner, then the credit score of each entrepreneur would be examined in relation to the company. 

So, it is crucial to know the credit score of the company to have secondary plans if the business landscape turns negative. 

Don't Mix Personal and Company's Finance 

To run the business effectively, a business owner has to keep the tab on the regular transactions and understand where the company stands financially. It will clarity in the mind and create goals for the business. 

While doing so, the entrepreneur should keep in mind to not mix personal and the business’ finance together. So, vendors' bills should not be clubbed together with household expenses. For tracking the company's financial health, the business owner has to create a separate bank account for the company. This will give information about the company’s monetary backdrop.

Don’t Mix Personal and Company’s Finance 

To run the business effectively, a business owner has to keep the tab on the regular transactions and understand where the company stands financially. It will give clarity in the mind and create goals for the business. 

 

While doing so, the entrepreneur should keep in mind to not mix personal and the business’ finance together. So, vendors’ bills should not be clubbed together with household expenses. For tracking the company’s financial health, the business owner has to create a separate bank account for the company. This will give information about the company’s monetary backdrop.

Keep a Record of All Things 

Business landscape has become dynamic and consumer demand is also changing swiftly. At this point of time, it is crucial for businesses to keep a tab on payroll, income and other deductions that are happening regularly. By adjusting cash flow, companies would be able to get a better picture and also, take appropriate decisions. The moves can include decrease in expenses, shifting to other products, cutting down offerings or inventory that are not of much use during the pandemic.

Create a Plan B

There is unpredictability associated with the future. No one knows when the customer demands soar like the pre-pandemic period and human lives return to normalcy. In this scenario, businesses have to be prepared to deal with the worst possible situation. 

The companies need to ascertain strategies presuming if consumers remain hesitant to come to the stores or buy goods physically. Analysing this situation, the companies have to come up with possible outcomes. 



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