4 Steps to Getting Your Business Finances on Track After a Crisis
The pandemic has had a global impact on business finances, and many companies are facing challenges they never anticipated. It’s forced businesses to take a step back, re-prioritize, and learn to be adaptable and flexible in uncertain times. If you’re struggling to navigate these uncharted waters, here are a few tips for getting your business finances back on track when we are, eventually, post pandemic. Some of these tips may even apply now, mid-crisis; just remember this is a very broad range of information, and your business is very unique. If you feel stuck or have questions about keeping your business afloat, now is the time to reach out to a CPA or other qualified professional for help.
#1: See how your numbers have shifted.
Because your cash flow is most likely different than what it was before the pandemic, now is the time to rework your budget and do some tweaking. If your business finances experienced a drop in income in the last few months, you’ll need to account for that in your budget. If you’re trying to bounce back from negative cash flow, you may need to make some sacrifices. This could be letting go of a few employees, cutting out “luxury” expenses, etc. It’s just like your personal finances — when times get tough, you’re forced to consider what is essential to survival and/or growth.
#2: Take advantage of financial forecasting.
The pandemic has taught us that no matter how carefully we plan, some things are just out of our control. This can be discouraging as our financial forecasts have the potential to change drastically at any moment. However, this is still a potentially helpful method for getting a better handle on how to formulate your future budget. Financial forecasting requires a look at past and present financial data and reports, patterns, and trends. This will help you estimate your business’s income and expenses and develop projections for profit and loss statements, balance sheets, and cash flow.
#3: Re-think your emergency funds.
If your business didn’t have an emergency fund before, you have probably come to realize the importance of having one. Emergency funds are often thrown to the wayside because the event of an emergency feels unlikely. However if there’s one thing this pandemic has taught us, it’s that life throws unimaginable curveballs when you least expect it, and it’s better to be safe than sorry. A good rule of thumb is to have enough money saved to cover at least 3-6 months of expenses. Even if you end up needing more than that, you’ll be grateful to have a strong baseline to draw from.
#4: Make paying off debt a priority.
Paying off debt is tough, but not impossible. There were various small business loan options established in the last few months to help offset the hardships of the current environment; take advantage of these. Make room in your budget to account for extra loan and debt payments. Focus on one debt at a time, and consider setting up a timeline or milestones for paying it off.
Struggling to budget your business finances? Taurus CPA Solutions can help! We are a full service accounting, tax and consulting firm offering a broad range of professional services focused on the needs of business owners. We take the fear out of finances by providing solutions and education to our clients, allowing them to make better business decisions. Contact us today!