The 2008 stock market crash affected the global economy. Financial companies and banks worldwide experienced significant losses. Companies in almost every sector were affected as investors reduced direct investments and people spent less. The collapse also brought about a series of job losses that ultimately affected the real estate and consumer durable markets.
Aside from a plunging stock value, a range of financial problems can put a company in crisis. Rising operating costs for fuel, utilities and materials continue to threaten business competitiveness. Companies that were involved in illegal activities can incur significant legal costs paying for lawyers, fines or settlement agreements. Declining property value can also affect the ability of many small business owners to obtain financing since they use their residential properties as loan collateral. You will also find it difficult to secure investment if your business has a low credit rating because it indicates you’re a risky investment.
Even though your business may be going through a tough time, you can take simple steps to overcome a financial crisis. First, you should keep your employees, customers and industry regulators regularly informed of what’s happening in your company. Be alert in issuing statements to customers and the media to control reputation damage. Be concise and make sure to release only verified information.
It’s also critical to manage your company’s cash flow to preserve cash. Reduce costs and plan expenses. Control credit by trying to collect debt efficiently. Offer discounts for early payments and large fees for late settlement. Work with an accountant to plan your cash flow. Look for ways to cut on needless spending. Consider performing tasks online such as bills payment and communications. Consider allowing some of your staff to work from home to lessen office costs.
Take this time to revisit your business model and reassess where your business is going. Perhaps you should focus on your line of business that is more profitable. Think of how you can market your products differently to suit present conditions. You may also want to develop other streams of revenue to help you weather the crisis.
Remain calm and optimistic. One way you could do this is to plan for a financial crisis in advance. It is very important for any business to establish a crisis management plan that will make coping much less stressful, minimize business interruption and prevent you from going out of business permanently.
When you have a plan in place to address an economic crisis, success is still possible. The dark clouds over your business will pass eventually, at which time your business will come out still in good financial health and ready to grab opportunities in an upswing.
Michael Mann is a forensic accountant and blogger who frequently contributes to finance and news blogs about both personal and business money matters.