Managing-Financial-Crisis

Managing Financial Crisis

Managing Financial Crisis

Running a business involves managing the business through both profit and loss. In a calm sea, anyone can be Captain; hence, an Entrepreneurs mettle is tested only by his/her ability to manage the crisis. In this article, we look at some of the steps that can be adopted by an Entrepreneur while managing a business undergoing a financial crisis.

Manage Cash Efficiently

A company becomes sick when it is not able to meet its liabilities and /or doesn’t have liquidity. Hence in financial crisis management, managing the cash position of the company is most vital.

Try to consolidate liquidity position actively and identify long-term and short-term funds – sources and uses.

  • Try to formulate a six months budget and a one-year cash budget for identifying monthly cash flows.
  • Identify fund shortfalls and take steps to bridge fund gaps wherever possible.
  • Create weekly cash budgets and discuss ways to meet liabilities and collect receivables ever week.

Be Positive

Business involves both profits and losses. Therefore, it is vital to be in the business to see better days and make-up losses.

  • Look at things from a longer perspective. Things will get better soon.
  • Try to minimize the time spent talking about what has happened or blaming.
  • Look forward and actively work to minimize losses/break even
  • Negative vibes from management will adversely impact top-level managers and employees. Talk to employees, reassure them things will get better soon. Good leaders always give hope and lead people rather than frightening them.
  • Consciously avoid talking negatively, unless absolutely necessary.

Don’t Get Lost in the Problem

To solve a large problem, it must be broken down into smaller sub-problems. Therefore, don’t be perplexed on how to handle the large problem. Break it down into months/weeks/days and work every day to handle the small problem effectively and make every day better than the last day. Then, the large problem will take care of itself.

Use time effectively

Time is a huge factor in crisis management. The time is given for instance by banks before an ad-hoc is due, or time given by creditors for payment, etc.,

  • Don’t waste this time chasing elusive solutions/solutions which you cannot influence (exotic funding options, foreign buyouts, etc.).
  • Work actively on opportunities that are within your grasp and ones that you are able to influence.
  • Don’t waste time sitting being perplexed by the problem.
  • Don’t postpone a decision when you are not able to solve a problem. Work with others to solve the problem without much of a delay.

Avoid Implementing Untested Policies

Don’t take drastic steps/major changes to production, product, inventory policy, etc., without adequate research and discussion backed by sound analysis. Old policies that have worked in the past have a better chance of working again as the market is picking up than untested methods/policies.

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