Is financial uncertainty a possibility for a small business owner? Yes. Indeed, financial uncertainty can occur for any enterprise. The key thing is to prepare for that possibility. As Thomas A. Edison said, “The object of all work is production or accomplishment and to either of these ends there must be forethought, system, planning, intelligence, and honest purpose, as well as perspiration.”
What is Financial Uncertainty
Financial uncertainty refers to the lack of sureness of a business’s financial future; the inability to forecast the financial consequences of future events which are critical to planning for the firm.
Financial uncertainty, frankly, is always present. It can include unexpected events like COVID-19, trade problems, environmental issues, political unrest, economic volatility, and inflation, as well as ebbs and flows of customers, and cash flow problems.
How to Prepare Your Small Business for Financial Uncertainty
- Navigating financial uncertainty starts first with understanding what types of financial challenges your company might face. Are there specific outcomes that can be predicted or outcomes that might be possibilities?
- It is important to examine and refine your business plans. Your plans should have some built-in flexibility considering key financial scenarios and effective strategies for dealing with them. The plans should include alternative sources of funding, alternative vendors, alternative organizational structures, and ways to gain more customers. Your planning should enable (even guide) you to pivot, if necessary.
- It is critical to stay on top of your finances. You need an accurate picture of your cash inflows and outflows which will allow you to manage cash flow and move funds around as needed. You also need some “rainy day” funds. Use your financial statements to review your numbers and consistently track your growth and financial trends. It is essential to keep careful tabs on your expenses, revenue projections, cash flow projections, profit margins, and tax payment estimates. You should want to avoid surprise costs and carefully control both costs and debts.
- Get quality control in order. Keep your product or service quality at a consistently high level so that you don’t lose customers due to production problems.
- Diversify your products and services so that you are less susceptible to changes in customer demand or customer behavior, new competitors, industry disruptions, or market saturation.
- Simplify processes. Find ways to make your operations more efficient.
- Focus on your customers. Find ways to add appeal and value to your business. Communicate better with them. Find out what they need right now and then take even better care of them.
- Embrace uncertainty. You can’t always control it, but you can lean into and learn from it. To embrace it make sure that you listen carefully to opinions and arguments on how to proceed. That means realizing that there is often more than one answer and many positive ways to proceed. At the same time, it is important to know that you shouldn’t be afraid to “swim against the tide” if your experience and instincts lead you to do what others aren’t considering that you should do.
- Seek experienced accounting and financial assistance. Oftentimes, a dispassionate outsider can see things that you can’t see.
Get Expert Accounting and Financial Assistance
Contact Doerhoff & Associates, CPA, based in Jefferson City, MO for professional accounting and financial assistance that you can count on. Doerhoff & Associates has one goal in mind, to provide comprehensive business accounting services designed specifically for your success.
