The country has lived with the echoes of a financial crisis for some time: today, the global crisis caused by the Covid-19 virus has further aggravated fears for the economic future of people and companies. Hence, the fundamental importance of applying the main concepts and good practices of financial management in times of crisis.
Through financial education in times of crisis, your company acquires greater control over receipts and costs, facilitating the process of balancing accounts at the end of each month.
In addition, financial management in times of crisis allows for strategic analysis of the right moments for invest or hold money to make it pay and thus avoid losses.
As financial management is an elementary tool for your business, it is essential to stay on top of how functional this type of strategy can be – both in a financial crisis and in calm days.
In order to create efficient strategies that protect your company from external threats, it is important to carry out a financial management in times of crisis that respects the following steps:
- analyze the scenario;
- evaluate the company's resources;
- cut spending;
- study new ways to increase revenue;
- reassess internal procedures;
- renegotiate your debts;
- be transparent with employees;
- don't rely on just one strategy;
- total attention to cash flow.
What is the importance of financial management?
It does not matter if we are facing a financial crisis, recovering from it or if it is foreseen on the horizon: financial management must be an instrument continuously used by your organization.
Especially, in a country whose small businesses respond to 96% of bankruptcy filings.
With the lack of planning, difficulties in applying financial discipline and the crisis in Brazil itself, entrepreneurs must develop new ways of dealing with the survival of their companies. And this is only possible based on excellent financial management in times of crisis.
That is why financial education in times of crisis is so relevant in the corporate environment.
Why implement financial management in times of crisis?
Any management principle provides for integrated decision making, in which a strategy does not harm other areas and objectives of the company, and which does not negatively impact its financial health.
For example: there is no point in hiring twenty new employees, if the company does not yet support this growth, nor does it have the resources to accommodate these dozens of newly hired employees.
In times of financial crisis, development without proper care can have the opposite effect: with less income, any undue investment can cause a major disaster in the accounts.
Thus, strategic financial management must be applied to contribute to more analytical power in those decisions.
Not to mention other characteristics that should encourage any manager to implement this management, such as:
- financial organization to handle inflows and outflows of resources;
- understanding of the main objectives of the organization, and learning to reach them without risk;
- basic notions of organizational capacity to honor your financial commitments in the first place.
If we have a financial crisis ahead, then these management principles can be crucial for the maintenance and even the gradual growth of the company.
How to do financial management in times of crisis?
In order to have good financial management, in the face of an adverse economic scenario, all teams must unite in favor of a common goal: care for finances and strategic use of resources.
And that can be summed up in some elementary actions, as we will see below!
1. Analyze the scenario
Because it is an external problem that directly impacts the company, financial management in times of crisis must begin by assessing this situation: How can the financial crisis impact expenses in the short, medium and long term?
Make projections and analyze which alternatives and actions must be taken in the face of each of these possibilities.
2. Assess company resources
First, calculate what the organization's costs (fixed and variable) are, to know exactly what how much is needed to keep it functional.
As much as the growth is less, in this period, it is important to have a guideline on what values the employees must reach to ensure that the month ends “financially”, at least.
3. Cut spending
Financial management can also serve as a monitoring tool.
Find out which expenses are superfluous or which lawsuits have yielded losses for the organization.
Stopping these problems is often an alternative to obtain more income in the short term.
Read too: Company costs: how to reduce without losing the quality of service?
4. Study new ways to increase revenue
If revenue falls dramatically, in times of financial crisis, orient yourself by means that help improve the rates and allow you to increase your company's revenue. Some examples:
- promoting products / services that have been out of stock for longer;
- differentiated services that the competition does not practice (such as faster deliveries);
- offering more advantages to the consumer of payment methods;
- accessible dissemination strategies, such as digital marketing.
Remember to align these ideas according to the goals and needs company, so that the budget is not exceeded at any time.
5. Reevaluate internal procedures
How about mapping your entire company? Evaluate which stages of the flow – or even entire areas – can be integrated with other processes and, as a result:
- reduce working time;
- decrease the payroll;
- promote more quality to the process as a whole.
6. Renegotiate your debts
Its financial management in times of crisis may also include strategic work to “breathe” into the company's cash flow. To do this, evaluate the possibility of renegotiate the terms and amounts of corporate debts.
Thus, you are able to bear the costs and retain part of the income internally, for eventual emergencies, while organizing yourself within this context of financial crisis.
7. Be transparent to employees
In the crisis, more than ever, management must know how to transmit reality to employees. After all, everyone is in the same boat.
Thus, it is worth exploring:
- the benefits of retaining spending;
- some practical measures so that the company does not end the month in the red;
- what are the main financial pitfalls that can affect them on a daily basis.
In fact, to help, there are technological ways to ensure more control of finances. We made a post with “8 financial management tools to optimize your results”. Take a look, after finishing this article!
8. Don't rely on one strategy
Previously, we had mentioned the importance of having projections for different scenarios, and this is where they make a difference.
By relying on a single action plan, any changes in the economic scenario of the financial crisis can put everything at risk.
Therefore, build a strategic plan to anticipate adverse situations and, thus, the response time of your team will be smaller, more assertive and with less negative impacts.
9. Total attention to cash flow
All financial management also gives multiple care to the company's cash flow – outflows and receipts.
It is important to have a complete forecast of this so that there is no imbalance in finances until the crisis is completely resolved.
With these tips, it is easier to guarantee layers of protection to the company, even in the face of a financial crisis. To this end, the focus should be on preventing sales from falling, and maintaining the business so that it remains prosperous when uncertain times come to an end.
New ways to manage company finances
Implementing new ways to manage costs and expenses can help your company make a strategic financial management.
An example of what can be adopted is the HR Consultants UKy a new product from HR Consultants UK, on demand salary, which companies from all sectors can offer as corporate benefit employees and grow in loyalty and productivity.
Online businesses can also benefit from this model. Read more about this at; “On-demand payment: what it is and how to adopt the salary on demand! ”
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