How Owners and Entrepreneurs Can Deal With Financial Stress

Millions of people across the globe have been left unemployed over the past half-year and are subsequently struggling to cover their bills and keep a roof over their heads. For business owners, the situation is even more precarious.

Unfortunately, despite fewer (if any) customers coming through the doors, businesses still have overhead expenses that need to be covered. Even those able to move some operations online likely still have had to contend with rent, utility and insurance costs and other financial obligations. Additionally, some businesses may be obliged to cover the costs of supplier contracts even though they may not be able to use the items.

Even though there have been provisions for businesses to defer payments, once they start trading again, these payments will need to be made. All of these adds up to a massive amount of financial stress for any business.

Signs of Financial Stress

There are quite a number of signs of financial stress, and many of these have been aggravated by economic shutdown and recession. These include:

Poor Cash-flow:  Since many businesses have been forced to close, this essentially shuts off the flow of cash through their doors. All businesses experience periodic dips when cash is tight, but when there is no money being generated on-site, your business is bound to feel financial stress.

High-Interest Debt:  Many lending institutions are wary of the viability of businesses, particularly new enterprises. This means that your business may have high-interest debt.

High Outstanding Receivables:  There are lots of enterprises under a financial strain, so it’s possible that your outstanding receivable amounts have gone increasingly higher. While you may be accustomed to receiving payments from your customers within 30 days, you may now be expected to wait far longer. The chances are that your customers have also shut their doors, so they are not in a position to pay their outstanding debts.

Identifying the Necessary Adjustments

There is no doubt this is a challenging time. That’s why it’s crucial that you can identify the necessary adjustments you should perform. This should include:

Tracking Your Expenses:   Conduct a proper evaluation of your fixed and variable expenses. You can then compare this against your revenue status. This will provide a clear picture of where you stand financially and aid you in planning ahead.

Check the Feasibility of Your Business Model:   You should consider the changing market, reassess where your business stands and whether your business model is still feasible. You will need to evaluate the impact of your revenues and costs and whether there are new sales, credit cycles and bad debts.

Evaluate Your Future Policies:   Since it will be difficult to estimate how long the current conditions will last, you need to evaluate and adjust your policies for the next month, three-months and year-long periods.

Most SMEs appreciate that the market is never stagnant, so they are often prepared to make adjustments to plans. However, the current situation has highlighted the importance of identifying where you can make changes now.