Every time economies take a turn for the worse, small businesses are the ones that suffer most. This is especially true for companies that depend on foot-traffic to survive, such as apparel stores, entertainment venues, and food hubs. When funds are low and the prospects are poor, how do you make sure you’ll still be operational at the end of the economic downturn?
Before resorting to big commitments like loans or drastic decisions like temporarily shutting down, consider first the money solutions at your disposal. You’ll be surprised at how a bleak picture can look more hopeful when you break it down into manageable tasks.
Mind Your Obligations First
If you’re already knee-deep in financial strain, the first thing you’ll want to do is to make sure that you don’t attract more trouble. You can achieve this by ensuring that you create a feasible strategy for directing funds toward employee salaries, debts, and vital operations expenses. You’ll also want to ensure that you remain compliant with taxes and other accounting responsibilities.
It may seem counterintuitive, but working with a reliable taxation compliance attorney in difficult times is one of the best decisions you’ll make. An attorney can guarantee that you maximize tax strategies, and he or she can prevent you from incurring hefty penalties.
Letting a professional take care of intricate tax laws will give you the peace of mind you need to come up with other money solutions. These may include wage and workforce adjustments that will lighten the burden of a bi-monthly or monthly compensation. In crises like a pandemic, employees are more accepting of a salary cut, as it’s a better alternative to being let go by the company.
Just make sure that you enforce these temporary cutbacks properly and you’re transparent about how this affects each designation in the hierarchy. The biggest cuts need to come from the highest positions and get smaller as it trickles down to the back-office workers.
Talk to your vendors, too, so that they know you’re in a financial bind. They might be willing to consider late payments, smaller orders, or other compromises that will help you maintain your partnership.
Whatever you do, make sure that you secure these essential expenses at the onset of the economic downturn. These will be the same investments in money, time, and effort that will guarantee you will continue to operate even in hard times.
Converse with Your Lenders
Surviving your business’s money woes involves a lot of tough conversations, and one of those is with your lenders. If you’re still in your first few years, then chances are big that you’ve got one or two loans hanging off your back. Chances are even bigger that you won’t be able to pay your monthly dues to your lender when the economy crashes.
Starting an honest conversation with the company or bank you owe is one way to open the possibility of negotiations. Banks are at the forefront of economic forecasts and will have a pretty good idea of how badly a certain industry is affected by an economic depression. They could be more lenient in their payment terms, or they could agree to your proposition for lower rates. Believe it or not, lenders appreciate honesty and initiative because it shows that you’re committed to returning their money.
Neglecting this conversation can lead to terrible consequences. Banks can take action like retrieve your collateral or make legal demands for the return of the principal loan amount. You don’t want to face this extra pressure, so it’s best to pick up your phone and coordinate with them ASAP.
Cultivating a pessimistic attitude when it comes to your financial projections is a healthy practice during an economic downturn. When you’re keeping a close eye on your profits and expenses, you want to have the worst-case scenario in mind. This will enable you to plan more cautiously and prevent your sources from running dry.
Do this on a weekly basis so that you have a regular update on your financial status. What’s your minimum expected income? What’s the most conservative amount you can expend on overhead and operations? These forecasts will also show you when your cash flow finally takes a positive turn. You can then begin to improve your predictions and use other strategies to amplify your profit.
Practicality will save you during an economic crisis. Keep your business alive by prioritizing your top obligations and be pessimistic about your financial forecasts. Do you owe money that you can’t pay back as soon as possible? Talk to your lenders as soon as possible. The best money solutions for small businesses in uncertain times are often the simplest ones.