Financial Tips for Small Business Owners: Navigating Uncertain Times

Running a small business is rewarding, but it comes with various challenges, finances being one of them - especially when the geopolitical landscape has gone wild and numbers simply aren’t your thing.

Whether you're an entrepreneur struggling to keep your small business afloat or a seasoned business owner trying to navigate unpredictable economic times, handling finances for your business is crucial but can feel daunting. In this blog post, we will share our tips on how you can manage your finances during periods of economic uncertainty.

Create a Financial Plan

One of the most effective ways to navigate any kind of uncertainty is by creating a plan – essentially its your road map to success. It outlines where you want to go financially and how you’ll get there.  A good place to start is by knowing your short and long term goals, then forecasting your business's income and expenses, from there you can evaluate your current financial position, and identify any risks your business might be up against.

Most accountancy software will allow you to run reports and track your performance, helping you make decisions at every stage. By reviewing this monthly, you’ll see where you have opportunities to reduce costs and maximise your best income streams.

We love a good financial plan and a well-crafted one helps you make informed decisions, prioritise actions and measure your progress. Without it, you’re essentially driving blind. So take control and let your financial plan turn your thoughts and business dreams into achievable goals.

Have a Financial Cushion

It is always good to set aside a percentage of your revenue to create a financial cushion, planning ahead in anticipation of uncertain times. Having a financial reserve can help you cover sudden expenses, unexpected costs, or a downturn in business. We saw this come into play during the pandemic. I recommend aiming to have a minimum of three months' worth of expenses set aside as a reserve.

Stress-Test Your Business

What does this mean? Stress-testing your business means simulating a set of tough scenarios and projecting what the impact would be on your business – will your business be able to handle a crises? 

Consider how your sales, cash flow, and stock would be impacted. This can help you prepare for potential financial challenges and make appropriate adjustments to your budget, stock, and marketing strategies.

It’s like a fire drill for your finances. By doing this, you identify weak spots, meaning you can be proactive, not reactive and make plans to strengthen your business.

Maintain Relationships

Relationships matter, no more so than in uncertain times. Doing what you can to keep in favor with your bank and suppliers will help you if you face an unforeseen situation. Banks are more willing to lend money to businesses with good credit scores. Similarly, good relationships with suppliers can help you negotiate better payment terms, discounts, and extended repayment plans to help you manage your cash flow better.

Stay Up To Date

Staying current with regulations and laws isn’t just about compliance, its about staying competitive and trustworthy. When you know the rules of the game, you can play it better and smarter. Plus, this knowledge protects your business from costly mistakes and legal hiccups. A bookkeeper can be your MVP (Most Valuable Player) in this arena, helping you stay informed and organised. Make the law your ally, not your obstacle, and build a business that’s both resilient and reputable.

Conclusion

Managing finances during uncertain times can be challenging, but it is not impossible. By creating a financial plan, establishing a financial cushion, stress-testing your business, maintaining good relationships and getting the support of an expert bookkeeper or accountant, you have the best chance of navigating financial uncertainty and taking care of your financial health. Preparing for the future is always more advantageous than reacting to it, so take the initiative to start planning today

If you’d like to talk to me about how I work with SMEs email me on [email protected]