No one knows what the future holds, especially at the moment. Which can make planning for your business a daunting task. However, there are ways to plan for uncertainty so that you can be in a better position to weather any storm that comes your way. It’s safe to say that most businesses fail because of short-term cash flow problems, not because they are bad businesses. And it’s important to be aware of that. In this blog post, we’re going to focus on taking a look at the things you can do to plan for uncertainty with your business finance and particularly why contingency is essential.
Consider Your Costs
To begin with, it’s a good idea to recognise that now is a great time to look at your costs of running the business. Is there anything you can do to cut them back? If something isn’t essential for the running of your business, it may not be necessary to keep paying for it. It’s also important to look at fixing energy contracts wherever possible to ensure that you’re stable in that area. Making sure you’re with the most competitive supplier isn’t a five minute job but well worth the effort. Where you can, also take a look at moving your cash into accounts that pay interest. One of the benefits of rising interest rates is that investment rates have also increased so rather than just leaving it in your business account, find somewhere that pays you a return
Have a Contingency Fund
One of the best ways to plan for uncertainty is to have a contingency fund set aside. This way, if something unexpected comes up, you have the cash on hand to cover it. A contingency fund should be separate from your operating expenses and should only be used in case of an emergency. Aim to have at least three months of overheads saved so that you know you can weather the storm if you have a tough few months. This can be something that you either save for, or arrange a funding facility now, so that when you need it, you have it in place ready.
Be Flexible
Another important way to plan for uncertainty is to be flexible in your approach. This means having a business model that can pivot as needed and being open to change. For example, if you own a brick-and-mortar store, consider adding an online component so that you can reach a wider audience. Or, if you typically sell products, consider adding services as well. Being flexible will help you adapt as the world around you changes.
The Action You Can Take Today
No one knows what the future holds, but that doesn’t mean you can’t plan for it. By having a contingency fund, you can feel as prepared as possible. Plus, the best time to borrow money for a contingency fund is now—whilst it is available and you can demonstrate your company can afford it. Just make sure that you don’t wait until it’s too late and your business is struggling!
Not only that, but interest rates are still on the rise. So right now it’s worth considering arranging your rainy day funding facility and fixing the interest rate before we see more rises. This could be combined with paying off and consolidating other funding you may already have, which could be at higher rates or over shorter terms.
At First Oak Capital, can walk you through a wealth of options, from term loans, asset finance, invoice finance, and more. We offer a free consultation service to discuss funding options that may see you through the uncertain times we’re all facing.
