How to get your business back on track with its finances.

Realizing that you need to get your business back on track is the first step in planning the recovery. If it’s worth saving, save it. If not, start building something new with your finances.

The second step is to create a budget and keep updating it to monitor progress. This could be made easy by engaging a financial advisor and purchasing accounting software for proper accounting. The budget should take into consideration key factors like re-stoking, rehiring, or retraining staff, revenue targets as well as marketing costs.

The third step is managing your revenue and expenditure guided by the budget. This involves activities to maximize your revenue and keep your expenditure at a minimum. All your expenses must be matched to the revenues to give you the desired bottom line. Maximizing your revenues will involve activities like marketing, promotions, competitive pricing, winning back old customers, and sales commission programs. Remember to only invest in marketing activities capable of generating a conversion. Minimizing your expenditure will involve activities like cutting costs from old operations, cheap product sourcing, monitoring variable expenses, and outsourcing highly skilled personnel. Renegotiating favorable terms for contracts like leases, transport, and finance costs could also come in handy. All expenditures must be monitored regularly against the budget and any variance investigated.

The fourth step is managing your working capital. Healthy working capital means that you are able and capable of settling current liabilities as and when they fall due. To achieve this, set aside an emergency fund, avoid overstocking, collect your receivables as early as practical and negotiate for longer credit periods with your suppliers. Negotiating for an overdraft with your bank could also come in handy in maintaining your liquidity. Proper management of your working capital will ensure that you maintain a positive cash flow through the recovery period.

The individual financial situation could be different. It’s therefore advisable to consult a business advisory firm like Cliff & Company to walk the journey with you.

Good Luck!