This post was originally published on Aug. 12, 2020, and it was updated on Jan. 14, 2021.
Most people cannot read minds, nor do they have a crystal ball to help them predict the future. Businesses owners and entrepreneurs can, however, look at a tough situation, learn from it, and be better prepared for future crises.
According to the Small Business Administration, small businesses in the United States account for 99.9 percent of all U.S. businesses. However, because of the recent pandemic, one in five small businesses are closed. And, a U.S. Chamber of Commerce study shows 55 percent of them believe it will take at least six months for the business climate to level out.
In this video, we spoke with Elsi Aga, Senior Account Manager at #OpenWeStand partner, Next Street Financial, who encourages entrepreneurs to adopt healthy financial habits for small business lending and avoid cash flow mistakes in the new year:
Beginning in March, Better Business Bureau Serving the Pacific Southwest (BBB) began offering free webinars to help small businesses weather the COVID-19 storm. During one such webinar, Jenn Dimeck of Four Leaf Financial & Accounting, PLLC, offered small business finance tips to help them build a stronger company, in spite of the current market.
“While we all love good economic times, it can drive us to be complacent. We have this sense that everything is good which can lead us to be too optimistic to create a reserve and make sure our money is working for us, not just sitting there. The feeling that everything will always be good removes the pressure or urgency to create a contingency plan.”
–Jenn Dimeck of Four Leaf Financial & Accounting, PLLC
To help us avoid this pitfall, Jenn outlined the following four small business finance tips:
Tip 1 – Create a plan and practice it.
“Take the time to sit and think about what you have learned. How are you going to operate differently in the future?,” asked Jenn. “For example, technology empowers and has enabled businesses to adjust to a new type of work environment. Many have also learned 3-6 months of operating capital can get you through a crisis but having a full 12 months can get you through the storm. Plan, practice, plan, practice! Doing this can help you identify any weaknesses within your business.”
Tip 2 – Monitor working capital and efficiency.
Jenn stated, “I think there are three basic financial areas you need to have your thumb on the pulse of, in your business at all times. The first is inventory, second is turnover, and third is days of cash on hand. Being aware of this, allows you to forecast your cash flow and measure your 3-month, 6-month, and 12-month thresholds. So, if your goal is to have 90 days of cash on hand and you have 20, start making some decisions on what you can do from an expenditure standpoint, credit collection, etc., and get those numbers up. Ask yourself how efficient your staff is? How successful is the marketing and sales part of your business? It all counts!”
Tip 3 – Multiple channels of communication creates many connections.
“During this time, I have received tons of notifications from businesses about what they were doing to remain open and I chose to see this as a great way to learn, possibly borrow, and implement new policies. I know this is a financial-based webinar, but I would not be doing any of us justice if I did not talk about communication and its importance,” said Jenn. “There are so many new ways to get your message out there through emails, text, videos, virtual meetings, and even social media. At the heart of it, communication can be good or bad, destroy a business or build it up.”
Tip 4 – Pivot and respond to changing needs.
“Many of us have had to figure out ways to diversify our supply chain, find new distribution channels, leverage employee talents in exciting new ways, identify talent gaps, provide training, and get creative with employee benefits. Discovering your ability to move and change can help you not only be different but better and this really speaks to a company’s bottom line,” claimed Jenn. “The interesting part in all of this, is watching a business use the same materials but develop new products and services to fulfill altering demands.”
If you follow these four small business finance tips: having a tested plan, monitoring business health, building liquid assets, and being flexible — it may mean you and your business will not just survive, but thrive.
To read more from BBB and our resources on #OpenWeStand, click HERE.