Emergency situations arise for all businesses. Staff members quit with short notice, inventory is lost or delayed, and payments fail to arrive on time, leaving you short of working capital. However, with proactive strategies, you can avoid emergencies and prevent disaster.
ALWAYS HAVE AN EMERGENCY FUND
The best way to avoid being caught unprepared for unexpected expenditures is to always have reserve capital. An emergency fund is funding you can access quickly to keep your business operating during a difficult situation. When profit is high, put money aside so you can draw on it when a crisis arises.
Factoring is a good way to access capital quickly if you haven’t built an emergency fund. This process gets your cash flowing by selling your accounts receivable invoices to a third party. The factor pays 80 to 90% of the amount owed to you within about 24 hours, then collects the debt themselves. It’s a better option than going into debt with credit cards or loans when dealing with financial emergencies.
PREPARE YOUR PROTOCOL
Creating a plan for dealing with a crisis is critical for success. Although you can never imagine every scenario, common types of emergencies companies deal with are staff loss, loss of inventory, and legal problems.
TURNOVER
No matter how positive your company culture may be, turnover is inevitable. Replacing an employee after they have put in their notice leaves you scrambling to create ads and find someone to train on short notice.
For this reason, you should always be recruiting. Even if you do not have an open position, stay alert when networking or even shopping. Your next talent acquisition could be your waiter working their way through college. Always be ready to give your card to someone who shows potential.
PRODUCT CONTROL
Whether in the service, transportation or manufacturing industry, you require goods to keep the business going. When a delay or loss of inventory occurs, sales can come to a halt which can cripple your business quickly.
The wise approach is to do business with more than one supplier. Diversify your orders between your vendors, keep communication open and always pay on time. These simple steps will help ensure when a needed good is not available through your normal channel, you can reach out to your others connections to get what you need to keep operating.
Although having a surplus of a high-demand product may seem like a good idea, this option can limit the cash flow of small businesses and startups. Sales forecasting and keeping multiple vendors are wiser strategies in the age of just-in-time deliveries.
LEGAL ISSUES
Every business should have legal representation they can call on in the event of a problem. A good business lawyer is needed to be able to solve dilemmas which will occur. Proactively seek out legal advice regarding employment disputes, contract handling, copyright questions and other situations is worth investing the retainer fee to avoid the negative impact of a lawsuit.
By doing some groundwork, you can prepare for each of these situations. Every business needs to prepare for emergencies to avoid them turning into disasters. Create a written plan for dealing with each type of emergency your business is likely to face, put money aside in an emergency fund and rest easy in the knowledge that even if the worst happens, you know what you need to do to recover.