Turbulent times ahead: 7 tips to protect your business

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How to achieve the financial health of your company and what other factors should you mind? Read more in our recent blog

The ongoing shift in the global economy will present a challenge to all businesses. Whether you are growing your business and looking ahead to possible financial issues or struggling to stay afloat, it is essential that you have a plan for the next few months.

Call it a recession, a slowdown, or "difficult times." A turbulent future lies ahead for many businesses. Financial forecasting is becoming more important than ever: how much capital you really have, how much is available on short notice, how revenues come in, and how expenses go out. If you want to survive intact and possibly even grow, you need to manage your finances as tightly as you can.

Here are some tips you can do to prepare your business finances for upcoming turbulent times.

Evaluate Your Company's Financial Health

Knowing your data thoroughly is essential for assessing the best strategies to move forward. Assessing your company's current financial condition is the first step in mitigating inflation's impact.

Go over all the financial statements of your company first. A company's net income provides insight into its profitability, but it isn't the only measure of its health. Net income is how much profit you make after deducting company expenses like production, depreciation, tax, and labor.

By contrast, your operating profit margin reflects your company's earnings before interest and taxes. Managing expenses and generating revenue is an important efficiency indicator, as it indicates how effective managers are at managing expenses. When a company has a high operating profit margin, it is likely that its costs are effectively managed and that it has successfully generated sales.

The breakdown of assets and liabilities can also provide insight into the financial health of a business. Using debt ratios, a company can determine its ability to deal with outstanding debt; meanwhile, major capital expenditures over $1 million can help you assess your current financial position and potential growth.

Cash Flow Forecast Is King

Based on economic conditions and the expected demand, you may have previously compared each month to the same month last year. Currently, this strategy will not work, so it's time to analyze your outstanding receivables.

Be sure to check in with your sales team and customers to understand when payments will likely arrive. Keep in mind the economic situation might have an effect on your customers as well. This fact may have an impact on your cash flow.

The ability to predict whether payments will be on time, delayed, or partially paid will help you prepare.

Increase Productivity With Automation and Artificial Intelligence

Automating your business is one of the most effective ways to inflation-proof it. Investing in automation is a long-term strategy. Implementing workflow automation may cost you initially, but it can turn a profit in the long run. Reducing manual administrative tasks and labor can redirect funds elsewhere and increase profit margins.

Automating not only improves cost efficiency but also frees up potential and human capital. Employees can be assigned to high-value activities with fewer tedious tasks to complete. These activities are often neglected due to backlogged administrative tasks.

There are already quite a few automated tools on the market, such as Capila. It is an end-to-end financial management software offering virtual CFO services. Its virtual CFO team will explain the meaning of your data and make sure you can take qualified decisions in these turbulent times.

Identify the Moving Targets

A moving target can be an existing or non-existing customer, new emerging markets, a change in how you operate your business or a combination of these factors.

It is important to think creatively to identify all the moving targets, including those you might not have considered before. You can identify facts by using critical thinking, by paying attention to what you already know and may have stopped paying attention to.

Invest in high-margin, quality clients instead of low-margin clients. When clients take a long time to pay, cash flow can be disrupted. Growing small businesses must focus on paying high-quality clients. You will gain a competitive advantage if you can speed up the cash flow. You can offer incentives or markdowns to encourage early payments. As a result, your finances will run more smoothly, and your cash flow will be less prone to disruptions.

Cut Costs

Keep your expenses under control without sacrificing customer satisfaction by staying tight-fisted. Business owners, especially small ones, should be aware of this.

Every business faces two types of costs: fixed costs and variable costs. Whether your business is profitable or not, fixed costs must be borne, whereas variable costs can be reduced.

As an example, instead of buying expensive branded software, you can work with free, cloud-based, open-source software. Instead of traveling long distances, conduct free online calls and video conferences. Also, you could try bartering your services with other professionals to save money.

Reach Out to Your Suppliers

Request discounts from your suppliers or defer payments from them. Rather than losing your business, most suppliers would be willing to work with you on mutually beneficial terms. It is also possible for suppliers to offer you financing. You and the supplier could both benefit from taking out a loan if it results in a sale.

Take Advantage of Hybrid Work to Save on Office Space and Manage Labor Costs

Many companies had to adapt their workforce to a hybrid or remote model due to Covid-19. In two years, this has become the new normal and is here to stay.

Make hybrid work model part of your regular operations if you haven't already. Having the option of working remotely or flexibly will not only save you money but will also help you retain talent in a labor-friendly market.

Interested in such solutions?

Contact us and concentrate on your growth.

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“We are making the world of finances more comprehensible and bring simplicity into complexity by digitalization and automation of the financial world.”


Matyas Varga

CEO & Co-Founder

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