Is Your Small Business Prepared for a Financial Emergency?

Every small business faces its fair share of obstacles and challenges, which is just part of the nature of business ownership. If you want to ensure your business succeeds in the most crucial moments, ensuring you’re prepared for any financial emergency that might arise is an excellent place to start.

When dealing with a financial emergency, it’s essential you understand that some are inevitable. While you can’t always predict when a financial emergency will occur, your main goal should be limiting the amount of damage the emergency causes. That’s where preparation comes into play.

I’ve helped companies out of some less-than-ideal situations and I’ve concluded that there are four major financial emergencies that every small business should be prepared for. A proactive approach to these emergencies could ultimately be what saves your company. 

Let’s take a closer look at these four emergencies and how you can keep your business ready at all times. 

Natural Disasters and Emergencies

This one is extremely relevant to what we are experiencing now during just the first half of 2020. Natural disasters can come with very little, but most times no warning and could put your company at risk of permanent damage. 

While most people will immediately think of earthquakes, hurricanes, and tornadoes when natural disasters get brought up, this type of financial emergency should also include pandemics. 

Ensuring your company is equipped for these moments with backup servers, work-from-home plans, and loss prevention guidelines could potentially save your business when you’re recovering. Essentially, you need to have well thought out plans for any potential natural disaster or emergency your business may face beforehand rather than coming up with it as you go. 

Loss of Clientele

You work hard for your clients and the last thing you want to see is for them to leave. While your big clients will pose the biggest threat to financial loss, every client is important to the success of your company — regardless of how much revenue they bring in. 

If you’ve noticed that a large portion of your revenue is coming from a small list of clients, that’s almost always a sign that you need to expand your network and find more high-profile clients. You can also combine that with some lower-profile clients to give you a healthy balance of revenue. 

Bad Investments

Investments are an essential part of any small business, especially if you want to see your business grow and develop over the years. Unfortunately, not all investments will pan out in your favor and you’ll have to eat some losses here and there. 

Staying diligent before making an investment is the best way to prevent an unfortunate possibility of you losing money; however, some investments simply just don’t pan out. With any investment, you must be comfortable with a certain level of risk and ensure what you’re invested in aligns with your comfort level. As a general rule of thumb, you should never make an investment that your company wouldn’t be able to bounce back from if it doesn’t work out. 

Think of your investment as if you’re gambling — bet to win, but only if you’re ready to lose. 

Unreliable Funding

Every small business will rely on funding when looking to expand or make a name for yourself in your industry. While it can be difficult to say no to funding, you should always consider and fully understand where that money is coming from. 

Frequently, small businesses will rely on funding that never shows up or investors that back out before giving your business a chance. If someone seems unreliable, move forward with caution and don’t get your hopes up. Or even better yet, find funding elsewhere. 

Can a Certified Public Accountant Help?

If you’re looking for more ways to prepare your business for a financial emergency, a certified public accountant can help keep an eye on your business at all times. As a certified public accountant myself, I’d be happy to speak with you and go over how I can benefit your business in the short-term and long-term. 

Feel free to contact me at any time!
References

Delmore, Tiffany. “4 Financial Emergencies Your Company Should Prepare For.” Business Trends and Insights, 12 Aug. 2019, www.americanexpress.com/en-us/business/trends-and-insights/articles/4-financial-emergencies-your-company-should-prepare-for/.