Tips to build business financial resilience

With rising global and domestic economic uncertainties, the need for small & medium-sized businesses to build financial resilience cannot be overstated. It is critical to gaining competitive advantage in the short & long term.

Financial resilience is defined as a company’s ability to withstand shocks, readily adapt to the new realities and continue moving forward with short term stability, while positioning for long term growth. Below are 6 tips to build financial resilience within your organization:

Tips to build business financial resilience

We will now take a deeper dive into each tip mentioned above:

1) Implementation of effective cash management strategies: Including (a) automation of cash management processes to ensure increased efficiency, improved accuracy in cash forecasting , minimized liquidity risk, enhanced cash visibility, better and more timely decision making. (b) routine monitoring of key liquidity and working capital KPIs to ensure these are within the expected range (c) Greater cost control through the cutting of unnecessary costs. A cost that was justified a year ago may no longer be necessary. Also, leadership should create a culture of cost-consciousness throughout the organization.

2) Building cash reserves for future emergencies or unexpected downturns(such as revenue dips). This could be built up over time or on a lump sum basis.

3) Adaptive Leadership: The company should ensure that strong, agile, forward-thinking leaders are in place, who can pivot strategies and effectively lead the company through changes.

4) Risk Mitigation: Businesses must meticulously forecast internal & external threats and determine how best to mitigate them. External risks include supply chain risks and risks from regulatory actions(such as rising tariffs). Internal risks includes non-existent or improperly designed internal controls. These could increase the risk of misappropriation of the company’s assets or create material errors in the financial records. Even the best risk management protocols can’t eliminate all negative outcomes. The company should plan for this as well.

5) Strategic Financial Planning: This includes the development of forward looking financial models such as Scenario Planning. This is a “what-if “ approach, in which a company prepares for uncertainty by planning for multiple scenarios ( best case, worst case and somewhere in between). the company then develop adaptable strategies and actions that can work across the different scenarios.This enables the company to build resilience, as management has proactively developed strategies to operate in different environments.

6) Embrace technology. Use technology to create more accurate financial models, streamline operations, create greater efficiencies, perform repetitive tasks and free up staff to perform more strategic activities.

If you are having anxieties about your organization’s fiscal resilience, you are not alone. Here at WA Anderson CPA we can provide you with expert guidance on how to implement these and other tips to build financial resilience. Contact us today at (813) 489-0295 or info@waandersoncpa.com.