Running a business is never easy. Whether you’re an experienced business owner, or a first-timer with a new startup, it’s tough.
The business market has never been more competitive than it is now, it is all too easy for stumbling blocks to appear seemingly out of thin air.
It takes savvy entrepreneurial instincts and often years of experience to avoid some of business’ common, unexpected issues.
The core objective of most companies is to make money and be successful, to do so you need to understand how to overcome financial loss in business, and possible issues that could cause it in the first place.
However, sometimes such issues are just unavoidable. For that reason it is equally important to understand what you need to do when these setbacks do happen, how you can help get yourself out of a sticky situation, and how you can avoid getting into the same position ever again.
What is Financial Loss in Business?
To learn how to overcome financial loss in business, you first need to understand what it really is. Financial loss is when a company has a disparity between the money they are bringing in, and the money going out, leaving them in a net deficit. Financial losses can be a result of various things; from lack of consumer interest, to ongoing court actions, to interruption of trade due to a third party.
What are Common Causes of Financial Loss?
While financial loss might be a universal worry amongst all business owners, what isn’t universal is the possible causes. A business can fail to maintain a profitable bottom line for a host of reasons, such as:
- Expanding a business beyond means
- Paying rent you can’t afford
- Loss of product
- Financial mismanagement
- Third parties causing loss of trade
- Changes to market
- Changing consumer interest
How to Recover from Financial Loss
Being successful and avoiding financial loss is the obvious goal for all business owners, but loss can sometimes be unavoidable, and in some instances can even be completely out of your hands. So if you find yourself with financial loss in your business, is there anything you can do to help recover?
Identify the Cause
The first, most obvious step to recovering from a financial loss is to identify what caused it in the first place. If you have a hole in your boat you don’t fix it by bailing out the water, you fix the hole first.
Analyse your outgoings to find areas where you can reduce costs. Has anything changed in the business recently? Have you moved to a larger office space? Brought on a host of new employees? Launched a new product/project?
If your company is faced with financial loss, you should immediately take stock of all outgoing money. Be aware of all purchases. Review everything that goes out and you could find what’s causing the leak.
There are all sorts of reasons for financial loss. If you assess your outgoings and stumble across an obvious area of wastage then you should address it quickly. In business, a small hole can very quickly develop into a sinking ship.
Now, it is possible that your company’s financial loss can be caused by factors out of your control. These external issues can be more difficult to overcome than negligent internal spending.
For example, the COVID-19 pandemic hit virtually all industries hard, leaving many companies to close their doors, and even the ones able to re-open were left in serious financial holes. Fortunately, in many of these cases the reopening of business post-pandemic should go some way to restoring some financial security and set them on a more positive path.
Assess Incomings and Outgoings
Another thing to consider when faced with financial loss in your business, is to take a look at the money going in and out of your business. There is a real chance that the issue could stem from problems in this area.
For example, over-estimating consumer interest, or administration mismanagement can lead to a service oriented business over-purchasing stock.
Overstocking quickly leads to cash flow issues. Having too much of your money tied into inventory can lead to a company needing to take a loan in the short-term to cover things like wages and bills, paying back these loans and their interest can often financially cripple a business and lead to loss.
Another thing worth keeping an eye out for is if your business is allowing customers to forego paying up front, and instead owing you money without ever committing to a payment plan. This can be a slippery slope to financial problems if it becomes a habit.
A significant shortening of company income can have a dramatic knock-on effect on funds, and mean you can quickly begin to struggle to pay staff, or pay rent on your premises.
Restructure your Business
After investigating your company’s incomings and outgoings it is important to turn your eye to the business structure.
It is common for financial issues being down to mismanagement from the firm’s core structure and management.
Take an objective view of your management system, assess exactly where the company’s weak points are, where the financial hole in your business originates from and consider making changes to those areas.
This could be removing somebody in your team who isn’t pulling their weight, moving somebody over to a struggling area to help, or even hiring an expert with the know-how to help.
This restructuring can not only help you improve the company’s finances in the short term, but also streamline it in the long run. A more effective company is a more successful company.
Focus on Retaining, Regaining, and Attaining Customers
While finding the cause for financial loss is beneficial to the company and helps to ‘stop the rot’, it doesn’t actually help you recover from it.
The best way to overcome financial loss in your business is to find a way to boost your cash flow to wipe any accrued debt. By far the easiest way to do this is to increase your consumer-base.
Go through all of your strategies, your sales processes, your targets etc. with a fine tooth comb and see if you can devise new practices to reflect your new reality and get yourself out of your current hole.
Make sure you find a way to incentivise your current customers to come back, and come up with a strategy to attract new people to your business.
Finding new avenues to make profit can quickly correct any financial issues you may have been facing.
How Inquesta can Help You Recover from Financial Loss
For a clearer understanding of your business financial situation, and a reliable hand to help you learn how to overcome financial loss in business, you can always count on Inquesta.
With a firm understanding of finances in businesses across multiple industries and specialities, we are perfectly equipped to assist you.
No two situations are ever completely alike, this is why we provide a totally bespoke service, we will analyse your business and what the possible problems are and devise an appropriate solution to help.
The Inquesta team specialises in providing top-rate services in all areas of financial management. For more information on what Inquesta can do to help, contact our team today or request a free consultation.