All businesses experience market fluctuations. Periods of growth, and periods where business is more difficult. What matters is how you manage the cyclical nature of your business finances. Here are five tips to help manage your cash flow and keep your business financially secure through the down cycle.
- Prepare a What-If Budget. Every business should have an up-to date business and financial plan that includes at least two worst-case scenarios - one with a slight reduction in revenue, the other if something drastic occurs. Each should include an action plan to reduce costs to get you through to the next cycle.
- Set Money Aside While Earnings are High. This might include leaving some funds inside the business, or depositing money into your personal account to allow you to forgo taking a salary when times get tough.
- Keep a List of Discretionary Expenses. Every business invests in itself when times are good. While this makes perfect sense when revenues are strong, these are the first costs that should go when times are lean. The easier you can identify non-essential spending, the sooner you can begin the process of cutting back.
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