Your business needs money to survive and thrive. So, it is important to take measures to protect your finances. However, this is often easier said than done. There are numerous threats that could compromise your financial state. Additionally, there are plenty of unforeseen circumstances that could upend the way you do business. The following six tips will help you keep your business safe.
1) Perform a Risk Assessment
Start by doing a risk assessment for your business. This will help you to identify ways that your business’s finances may currently be exposed. There is a wide range of risk types that may be covered by this. So, it may help to start by focusing on a specific area such as threats to your business operations then move on to other types of risk such as liability and cybersecurity.
When you know what your risks are, you can make plans for them. This is the most reliable way to protect your business.
2) Protect Your Data
In the modern era, most businesses are operating on computer systems. Chances are that you have financial data on your computers. Additionally, you likely access your financial institutions online or through mobile apps. If your computer systems are exposed to attackers, your finances could be too.
Implementing a zero trust policy may be a good option. With this, your computer network is designed to check all types of data passing through it. In other words, it doesn’t trust any type of source of data without verification that it is free of malicious code.
3) Reduce Debt
Your debt level may be another risk for your business. Evaluate your debt against your assets and your income. Additionally, consider your short-term debt (credit cards, lines of credit etc.) utilization. It is sometimes okay to have relatively high debt levels. However, you want to make sure you are thoroughly in control of the situation.
Paying down some debt more rapidly could be a good way to protect your finances. Consider what would happen if you had a slow sales period. High debt can turn a slow period into a catastrophe.
4) Develop Relationships With Suppliers
Another helpful way to protect your business is to try to develop long-term and strong relationships with your suppliers. There are a few supply-related risks that can be serious for a business. For example, if you have a cash flow issue and cannot pay immediately. Another issue would be the supplier going out of business or not stocking the relevant parts anymore.
If you have a good relationship with your suppliers, both of these issues can be mitigated. Businesses are much more likely to offer credit to well-known customers in good standing. Similarly, they will be more likely to communicate with you and let you know about any upcoming changes.
5) Maintain Strong Cash Reserves
Having a reasonable amount of cash on hand can help you to be ready for the unexpected. Sometimes issues arise that are completely out of your control. The COVID-19 pandemic is a good example of this. When you have good cash reserves, you can keep your business running even when you have unplanned expenses or a sudden downturn in business.
6) Have a Business Continuity Plan
Finally, create a business continuity plan. This is a system of how you will continue to operate if your normal operations are interrupted. This may be caused by a natural disaster, a problem in your building or any other disruption.
Your continuity plan may include elements such as remote working for your employees. It may also involve investing in e-commerce sales. Try to think of what would happen if your business location was suddenly unavailable.
Discover more about protecting your business’s finances. When you try to predict risks and plan for them, you will be more prepared. Even if something you didn’t expect happens, your business will still be more robust for all the planning.