If you have been in business for a considerable amount of time, it is likely that your company will go through a difficult time. These harsh stretches could originate either internally or externally. From the inside, it could be caused by a serious breakdown of operational capabilities, lawsuits, thefts, mistakes, or inability to compete on the market. Externally, they could come from contingencies beyond your control such as worldwide pandemics, wars, economic recessions, etc.
Here are 4 things you can do to face these difficult periods and save your company from financial ruin:
1. Determine your Break-Even Numbers
The Break-Even analysis is a critical component of the daily management of a business. Essentially, it establishes the minimum revenue a company must reach to cover its financial obligations or expenses. The Break-Even Point is also referred to as the “Zero-Profit Point”. It is very versatile and can be used to support many managerial decisions especially the tough calls you have to make during a crisis.
2. Develop a Financial Plan
The financial plan will help establish a specific revenue goal to reach your company’s profit goal. It will also help establish maximum spending for each cost line item. With a robust Financial Plan, you can still develop a pathway to not only remain operational, but also earn a profit at the end.
3. Develop a Spending Plan
The Spending will help you determine the optimum spending limit for any revenue projection. Thus, if you anticipate a lower income for the next period, the Spending Plan will help manage the finances of an organization with a simple plan that is easy to follow and implement. The Spending Plan will also help eliminate over-spending which occurs in most organizations.
4. Develop a Comprehensive Budget
A comprehensive Budget will help determine the minimum revenue amount you will need for the following period to remain operational while at the same time being able to pay for probable and unknown costs.
An ideal budget includes the development these three sections:
• Common Costs: Determines how much you would need at a minimum to be operational for the following period
• Probable Costs: Determines specific costs that you may to incur for the following period. Essentially you know what these potential costs are but are unsure if you will incur them.
• Unknown Costs: You should also add an unknown factor percentage which will simply apply a percentage from the total of your common and probable costs. This Unknown Cost is usually reserved for costs that cannot predicted ahead of time because they are unusual, rare, and simply unknown. They may include costs such as fire, legal fees because of a lawsuit, breakdown of a machine, accidents, etc.
Cost Benefit Analysis should be the driving force when speculating. There are many different methods available to manage inventory. The most effective will always involve attention to detail, offer a precise accounting of the volume at any given point in time, and...
Have you ever gone to a psychic or a gipsy with a magic crystal globe to see your future? No? But you must have seen it on TV or in cartoons at some point in your life, so you know how the story goes. The globe reveals the future and provides a guide on what’s to come...
With smart break-downs, everyone’s job is easier. Insight: Many organizations struggle to gather and process their financial information because they utilize only one system to process every transaction. The following flawed system represents for example, the usual...
Quality Control Standards (QCS) ensure excellence in the delivery of products/services. With strong QCS, a company will remain competitive and grow its consumer base, and therefore develop a strong brand. The reason why many companies do not favor a complete...
Big data is still data, but it is large or massive. It is a collection of data that is complex, massive in size and continues to increase with time. It is challenging to process big data if a person or institution uses traditional methods. Due to its size and...
Artificial intelligence, is machine intelligence. Unlike that of animals or humans, Artificial intelligence is anchored on human innovation, creativity, the invention as well as knowledge. These machines are programmed to think and process data like humans. These...