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Financial Management Skills You Need to Have During a Crisis for Your Home-Based Business

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Financial Management Skills You Need to Have During a Crisis for Your Home-Based Business

It came like an earthquake. Sudden and unexpected, shaking us all to our foundation. The pandemic of 2020 has left us all rattled, but none so much as small business owners.

If you’re facing financial management challenges for your home-based business during this uncertain time, you’re not alone. But there’s good news: the challenges you’re facing can be managed by developing and implementing key financial management skills.

Create Cash Flow Forecasts

The financial impact of losing clients or receiving delayed payments under the current circumstances could be huge. Building a financial forecast for the next three to six months can help identify some major changes you need to make in the coming months and years.

Use this forecast to build a realistic outlook for how your future finances will look, and base your strategy around that. Additionally, create a cash flow forecast that will help you see where your money is being spent and when bills and expenses come due. Here are some suggestions: 

  • Consider your incoming and outgoing cash and make a realistic strategy that keeps the best-case and the worst-case scenarios in mind. 
  • If your business owes a debt, take that into consideration as well while projecting future finances.
  • Analyze how many new customers/clients you’ll need in the coming months and work towards a compelling strategy that brings in more cash.

Explore Financial Relief Options

Our instinct can be to take out more credit or borrow more than we need when we’re under duress. But that may not be the best strategy. Explore legitimate options for financial relief, such as disaster assistance from the Small Business Association. Also, check out the PPP loan program if that applies to your business. Some loans are even forgivable if you follow the guidelines, which can eventually keep you from closing down. 

If it still seems money is flowing out faster than it’s coming in, and you don’t have the funds to cover the downtime, consider the possibility of applying for unemployment benefits. If you have employees on your payroll, you may also want to look into the Employee Retention Credit under the CARES Act.

Negotiate with Vendors for More Savings

Take a good, honest look at what you’re spending with vendors and suppliers. Vendors that are also struggling right now may be happy to offer a discount or suspend billing to retain you as a customer. And if your business also has employees, they might adapt to a pay cut if it means keeping their jobs when things turn around. 

Home-based franchise owners have unique challenges and should explore other avenues to generate income. Contact your franchisor and find out what flexibility exists — consider temporarily adjusting the business model or requesting fee waivers. Additionally, take into account the following action items: 

  • Review your contracts with vendors for possible credit options.
  • Choose cheaper/more local vendors if your current vendors don’t give you the flexibility of negotiation.
  • Move around your franchise’s supply-chain challenges by thinking about robust supply-chain monitoring solutions.

Stay on Top of Bookkeeping

Keeping accurate and updated accounting records will help you get a clear picture of where your business stands. It might be an obvious practice, and you may already be on top of it, but it is crucial more than ever before. And if you don’t have a regular tracking practice, this is the time to develop one.

Among the biggest keys to successful bookkeeping is separating your personal and professional expenditures. If you’re thinking of using personal money in your business right now, it’ll be messy if you never separated your personal and business finances before. Now is the time to do so. Make sure you have a separate bank account and credit line for your business and avoid putting any personal charges on your professional card. 

Build a Budget That Supports Your Business’s Future

Creating a budget around your future business predictions and sticking to it may seem difficult, but it’s an essential step. It also means not doing everything at once — try to segregate different expenses based on your new budget that you may need to distribute across different business needs. 

Keep it small-scale to start; focus on the coming quarter rather than planning out the rest of the year. Look back at pre-economic slump numbers to distill trends in growth and revenue, and research how this has impacted your industry and the market as a whole. Here are some ways to do it:

  • Time your expenses and don’t put all your eggs in one basket.
  • Before you finalize your next contract with a vendor or an employee, ensure you’re sticking to the budget.
  • If you don’t have a cash reserve yet, start building one. It’ll help you come face-to-face with any unexpected expenditures.

Conduct a Cost-Benefit Analysis

Look at ways your business can respond to new needs unearthed during the upheaval. Listen to your customers, figure out what they’re looking for in a futuristic post-pandemic world, and put together a plan to meet these needs.

Conduct a cost-benefit analysis to ensure any major changes will be financially sound and create projections based on the estimated timeline of the crisis. Create a checklist of future opportunities that you have uncovered during the crisis. Think about your product or service delivery methods and adapting your business model to get your customers what they need.

If you’re looking at months of upheaval, a pivot makes sense. But as the situation normalizes, be wary of any shifts that will make it difficult to roll back. Ask yourself these questions to get a better grip on the situation:

  • Is it sensible to make any investments related to your business right now?
  • Should you consider any technology that automates your manual tasks and reduces the need for human intervention?
  • Do your “new” goals and strategies align with the new budget that you’ve set?

Setting up great financial habits will come in handy while you’re dealing with an unexpected situation, such as an economic slowdown. By making financially sound decisions and using the tips outlined here, you and your business can survive and even thrive in the wake of any crisis.

 

 

Author Bio: 
Wendi Williams is a freelance writer based in Indianapolis, IN, with over a decade of experience writing for a variety of industries, from healthcare to manufacturing to nonprofit. When she isn’t working on solutions for her clients, she can be found spending time with her kids and husband, working in the garden, or doing more writing (of the fiction variety).

Barjunaid Cadir is a Content Writer in The Weekly Trends, Web Developer, SEO Content Manager, LinkedIn Specialist, Social Media Manager, and a University Researcher at Anadolu University in Eskisehir, Turkey.

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