Today, the financial picture for many small businesses is drastically different than what it was even a few weeks ago. Businesses that were prospering at the beginning of March may be struggling or completely shuttered now. How do you stay afloat in this environment and position your business to survive and even thrive in the coming months?
Here are a few suggestions for what you can do now during the coronavirus crisis that will help ensure that your business will have a brighter financial future.
Evaluate Your Financial Picture
The first step is to get your financial house in order. You need to know where your business is financially—what are your greatest assets and liabilities. If your company is closed or doing a fraction of its usual work, now is a great time to take the time to straighten out the finances you were too busy to attack before.
Getting a sense of your financial picture helps you establish where you stand, what kind of help you might need, and how you can plan for the future.
Match Records to Reality
One of the primary reasons clients hire qualified financial professionals is because they can’t make sense of their finances. This is completely understandable; it can be tricky to keep accurate records, particularly during busy periods. Sometimes, the person who manages the finances (who often wears many hats) didn’t have any trouble with that task when the business was small, but as the company grows, that person’s financial skills might not scale accordingly.
Whatever the reason, when they do examine their financial records, many business owners find that the records tell a different story than the reality the owners know to be true. If this happens to you and you can’t understand your financial reports, dig into them and figure out where the problems are. If you can’t solve the problem on your own, you may need the help of a professional. Just as a professional decorator can imagine reconfiguring your furniture in a way you never considered, a professional CFO can give you a completely new perspective on your financial picture.
Categorize Finances Properly
When business is booming, it is easy to take shortcuts when tracking transactions. For instance, everything that is purchased for the office might be labeled “office supplies” when some of it is better categorized as technology, furniture, etc. Improperly categorized expenses might make you miss out on expenses that should be reimbursed by clients. Maybe the amount is small. But if you keep miscategorizing $27 or $53, it could add up to thousands in expenses that you’re eating when you should be passing it along.
Now is a good time to ask yourself, “why are we doing X this way?” Often businesses get stuck in a rut, doing things the way they have always done them. But the world is constantly changing. There might be a better method, superior technology, or more competitive service you can switch to.
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Funded, in part, through a Cooperative Agreement with the U.S. Small Business Administration. All opinions, and/or recommendations expressed herein are those of the author(s) and do not necessarily reflect the views of the SBA.