One of the most important roles that an accounts management team plays is managing crises.
First, let us understand what crisis management is?
Crisis Management is the process that involves the identification of threats to an organization and the methods used by the organization to deal with such threats.
Most of the businesses fail due to a cash shortage. The money invested and expended is more than what’s the working capital.
So, how do you start with crisis management planning? As well as what can be done if such an event occurs?
Let us explore the various options available to deal with any type of crisis management.
1. Start job costing
Start noting down the cost that each leg of the company brings up; marketing, payrolls, asset costs, products, and other services.
Put these costs against profit margins, and you will see the deficit. You will get a clear picture to work with.
You will see the profitable services differentiated from the non-profitable ones.
2. Expedite your receivables process
Determine the accounts that can be pushed to pay early. You need to be very careful about which accounts you are asking for early receivables.
Tap into the most promising accounts first, and while establishing new partnerships, ask for early part payment.
3. Look at possible borrowing options
You can be considering credit options and borrowing from legit financial organizations.
Be mindful enough to understand the interest rates and other things that can affect and hamper your business.
Before you take business loans, know that if your company has a cash flow problem at the primary level, the loan works only as a temporary relief.
4. Negotiate on your payables
Negotiating on your payables with your vendors can be a significant relief on your working capital. Be honest with your vendors about your paying capacity.
If you can push for part-payments, or a complete waive of even a penny, nothing like it. Remember to never negotiate to a point where you will be heavily indebted.
That would be the last thing you need during a crisis.
5. Eliminate expenses
When in a cash flow crisis, prioritize your company’s expenses.
Eliminate every cost and pay only the cost that keeps your business operational and keeps you running.
Keeping an eye on every penny that you spend is an excellent filter to sort out expenses, but more importantly, doing so during a crisis is helpful.
6. Manage non-essential assets
Remember that any asset that’s not required at present, or during a crisis, is a liability.
Sort your assets out and check for any asset that’s adding more cost than revenue. You could always do an audit of every asset that keeps your company moving.
Removing or selling off any asset that doesn’t help only relieve your business account.
7. Hire an outsourcing agency
One of the ways to be prepared is to hire an outsourcing accounts management team. A dedicated team that looks over your account books and balance sheets has preventive measures set up and has a plan B for a crisis.
An accounts management outsourcing team keeps track of your company’s financial records, forecasts cash flow shortages and raises, and keeps on hand methods and steps to take during a crisis.
The accounting outsourcing companies come with an added advantage of cost flexibility against the fixed cost of in-house resources.
Always keep a check on your company’s accounts management and always have a backup plan ready.
Keep your borrowing options open and immediately start job costing once you detect a cash shortage. Cutting down on expenses, trying to early receivables can all help in keeping your business running?
As a rule, always have a backup plan ready, or have a dedicated accounts management outsourcing firm do the job.