What happens if the financial future of your business is under threat? How do you recover from an unfavorable financial period or prevent your business from one? According to Errol Barnaby, Manager of  EXIM Bank’s Finance Department, there are several ways to preserve the financial future of your business.

First, what should you do if you are unable to meet loan payments for your business? The COVID-19 Pandemic has had a significant impact on the financial sector.  As a business owner, however, you can visit various financial institutions to get help in avoiding default and protecting your ability to borrow in the future. Business owners can speak to financial institutions to work out a moratorium or get loans restructured.

How to budget with an irregular income

As a small business, you may have irregular income or non-traditional payment schedules, so how do you budget? Barnaby suggests having more than one budget. In scenario one, you should budget at the lower end of your revenue, meaning you will do the lesser intake and enter the lesser costs or expenses associated with that revenue. When your income becomes steady, you can create another budget and start to raise the bar in terms of your expected inflow of revenue and the expenses that go with it.

Barnaby emphasizes the importance of monitoring your budget. He says business owners with an irregular flow of income should review it frequently.

What to do if you have negative cash flow

Even with a well-planned budget, however, businesses may experience negative cash flow. This is when a business spends more money than it makes during a specific period. What should business owners do in this case? Barnaby has three main suggestions. First, ensure that you have a standby line of credit, and second, cut your expenses for the meantime, or liquidate some of your assets to meet those obligations.

Business owners may notice that some areas are more profitable than others. In such cases, do you drop the least profitable? Errol Barnaby says don’t be so quick to do so. He adds that sometimes you have to keep the least profitable areas just to keep your market share – some areas may give you more returns than others. He further suggests that business owners should manage these low-profit areas and divert focus to the higher ones when necessary, as opposed to cutting them out. 

Signs of financial unfitness

Financial stability comes with multiple benefits but entering into financial unfitness can happen fast. What are some signs that your business may be financially unfit? 

• Inability to cover debt
• Profits are falling
• Accounting records are poor
• Staff is leaving

With the changes impacting the financial sector, it is important for you to monitor your business finances and take steps to avoid financial unfitness to preserve its financial future.

-END-