Remember that one month? The one where the business almost didn’t make payroll? This may have likely been due to cash flow shortages within a short period of time. Averting these problems may well require some careful planning and preparation for the future. Such plans should include contingencies and alternative sources of capital when other places fall short.
Having a backup plan in a small business is crucial to making ends meet when clients and customers turn elsewhere. It wouldn’t be more than a month before even the most well funded corporations ran into trouble without backup plans in place. One example could look like one or more teams within a company which rely on a software-based service to review projects in progress and determine daily priorities. When the service suddenly experiences an unexpected outage, how do these teams know what to accomplish? Are they waiting for hours, using company time, while the service provider works to bring the service back online? Or, do they choose to find another way? These are scenarios that business leaders often prepare themselves and others for in order to ensure productivity and profitability even amidst chaos. Plans made ahead of time can save numerous small businesses from the headaches and trouble caused by lack of preparation.
Having a backup source of revenue is very important for a business plan. Given that many industries are evolving with the rapid increase of automation, there is great reason to make sure that products or services remain relevant even after significant shifts in demand. How can small businesses find alternative income sources? This kind of money will depend greatly on how well a business can determine how the needs of the clients and customers are fulfilled. If for some reason, there is a possibility of becoming obsolete, actions should be taken to protect income from sudden market fluctuations. For example, a business which provides data analysis using traditional pen-and-paper methods may realize that their model has been quickly overtaken by software innovations which prove to be more accurate and less costly to produce the same results. In this instance, market research should then be conducted regularly and job roles should be adapted to better fit the needs of clients who need these particular services. With a backup plan in place, paper methods can still be used while the software based services become more utilized. Changes can be made until the company is fully ready to be flexible no matter which way the market turns.
Maintaining cash flow will give a company greater abilities to adapt when the market transforms. Choosing the right service providers can help reduce costs and ease overhead for small businesses. Alternatively, eliminating unnecessary costs altogether can prove to be more effective and eases cash flow for potential growth opportunities that may become available. For whatever reason where cash flow can be freed up, efforts should be made to recover the resources and allocate such towards productive and profitable operations within the company. How would your small business benefit from enhanced cash flow insights? Feel free to reach out and we will be more than happy to help you find a time and meet with one of our experienced accounting professionals.