How To reverse a Financial Crisis In Your Business
I am not a lawyer or financial advisor by any means, but sometimes we need some help in business. From what I’ve heard statistics show that 85% of all small businesses that start up fail in the first 5 years.
So, there’s a good chance that there will come a time when you look at your bank account and say to yourself, “I don’t have enough money to pay my bills”, or at the very least say, “I can’t go on holidays because there’s not enough money to pay for it”.
You have recognised the red flags that warn you in business that something is wrong. People with money didn’t come about it by luck. Many times they have had their business go broke and have had to start again.
They may have gone broke in the first place because they hadn’t learned their lessons well when it came to managing money rather than just make it. If you’re in or starting a small business you must be aware of or have access to information on how to handle a cash crisis should it come up in your business.
The hard part is recognising the crisis in the first place so that you can do something to fix it before it is too late. There are 7 steps that may enable you to handle a crisis in your business successfully. Complete the checklists below to assess your situation. Here are the steps:
Step 1. Check If Your Business Is In Crisis
Is your business generating enough income to cover your expenses without having to touch your savings? If it is not there are many reasons why this may be the case. This analysis of your situation is not comprehensive enough to cover all situations but should give you a broad picture of your situation.
We have to start from some point in your business to move forward in assessing crisis. I assume that you have sales coming in, you have a marketing program and you are physically able to work.
If any of these things are apparent in your business, for example, no sales coming in the door, you are probably too far-gone to bother assessing your situation. However if not, some of this information may be relevant to a certain degree.
Evaluate the information if it suits, that’s great. If it doesn’t, discard it. Basically you should proceed if the money side of your business needs attention. Go ahead and complete (“Doc 1”) because we need this information to go to the next step. Once that is completed you will have two important pieces of information.
1. How much you spend in your personal life2. How much you need to earn to support that amount (plus or minus)
DOC 1
Financial Analysis Monthly Yearly
FIXED DOMESTIC EXPENSES
Mortgage Payments or Rent Electricity Rates Fire and General Insurance Personal Accident or Disability Insurance Health Insurance Car Hire Purchase/loan Other Hire Purchase/credit cards Debt Reduction – Personal Loans Overdraft ECT Other Club Dues School fees Food and Living expenses Telephone Other TOTAL MONTHLY $.................. $ ………….
VARIABLE DOMESTIC EXPENSES
Medical, Dental, Chemist etc (net After Refunds)Clothing and Footwear School Requisites – Fees, books and sports Dry Cleaning and Laundry Entertainment, Theatre, Amusements Tobacco, Liquor other Personal Items Home Maintenance Running Cost – Second Car and Fares Church, Charities Etc Sports and hobbies Vacations Motor Vehicle (1) Hire Purchase /Lease (2) Registration & Insurance (3) Repairs & Maintenance (4) Petrol Oil Tyres Other Travelling – Parking tolls Fares Etc Telephone Other – Charges A/C Gifts ETC TOTAL MONTHLY $................... $ ………….
OTHER EXPENSES
Memberships Fees and other Self-Education Printing, Stationery, Postage ETC Telephone Newspapers and Periodicals Entertainment and Gifts Centre of Influence & Sub Agency Cost Other overheads – Rent Secretarial ETC TOTAL MONTHLY $................... $ ………….
SAVING AND ACCUMULATION
Life Insurance and Superannuation Investments Saving – Bank, building society etc Other TOTAL MONTHLY $____________ $ ………………
NET ANNUAL INCOME REQUIRED $ .................. $...................
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