If you think that all businesses make cash management their top priority, think again. A whopping 82% of businesses fail because of cash flow mismanagement. If such a large percentage of companies fail because they can’t manage their cash during good times, that percentage could only get worse during a recession.
Small businesses and new businesses are at a greater risk of failing during a recession than companies that have a firm financial footing. But there is hope. With a bit of prior planning, companies can recession-proof their business and survive tough economic times.
Take control of your cash flow and protect it
To be able to control your cash, know your numbers. Thoroughly understand your cash inflow and outflow. Cash flow is the life of your business and as long as it exists, money must continue to flow in and out of your company no matter the economic conditions. Your objective is to ensure that the amount of money coming into your company is more significant than what leaves.
You can ensure more cash flow by increasing sales and billable services and at the same time, cutting back on unnecessary expenses.
Invest in public liability insurance
Lawsuits could end up in the loss of several millions of dollars or even the closure of your business.Suppose you are into the tree service business and decided to invest in public or general liability insurance for tree service. You protect your customers, yourself, and your small business and prevent money from being lost on costly litigation. Public liability insurance is designed to protect small business owners like you from costly litigations sued by your customers, the public, or even your suppliers. You also need to see how criminal investigations into your corporation can affect your business.
When investing in public liability insurance, keep in mind that not all insurances are the same. There are several insurers and each one offers variations of this insurance. Check this article for information on how to choose the best public liability insurance for your business. You can also visit Quote Radar’s public liability insurance page to compare quotes: https://www.
Review inventory management
Cut back on costs whenever and wherever possible, without cutting back on the quality of the goods/products sold. Here are some ways you can do this and save money:
- Stop ordering excess of items and get rid of obsolete inventory. Instead, set up an automatic re-order on your logistic software for when stock gets low and not before that.
- Shop around for suppliers who will provide your requirements quickly at a lower price.
- Keep inventory costs down by speeding up supplier lead times.
- Choose alternative shipping services like drop-shipping so you can eliminate shipping/warehouse costs.
Build several revenue streams
Have multiple revenue streams. That way, you can ensure you maintain your income even in an economic downturn. With revenue coming in from many sources, your business can stay flexible and withstand any shifts that might be necessary for the future. Here are some revenue stream ideas that you might be able to add to your business:
- Incorporate services like affiliate marketing, monthly/recurring membership subscriptions
- Provide business services like one-on-one consultation services
- Generate more revenue from ad revenue and sponsored content
- Offer metered services, product subscriptions, or product subscriptions
Ensure your financial records are in order
According to an Australian survey, a business’s survival depends to a large extent on timely and accurate financial records.
The basic requirement for a small business to succeed in uncertain economic times is good accounting records. It’s effortless for business owners to turn a blind eye to their financial records. So, ensure your financial records are up to date and accurate at all times. These records provide vital information to grow your business and monitor KPIs.
Many companies invest in accounting software beyond their understanding, skill and requirements that further complicates their accounts. If you use accounting software, ensure you understand how it is to be used, meets your needs and is kept up-to-date at all times.
There is no single solution to make your small business recession-proof but there are steps that you can take to ensure that you have control over your cash during challenging economic times. If you incorporate these tips well in advance, you can even hope to make profits even while an economic slump hits businesses around yours. The first step is to analyse how your business is currently doing and then making improvements.
BizCover. 2020. 5 Tips for Getting the Best Public Liability Insurance for Your Business. [ONLINE] Available at: https://www.bizcover.com.au/5-tips-for-getting-the-best-public-liability-insurance-for-your-business/. [Accessed 2 September 2020].