Now, we know very well how rough the year 2020 was. It started badly and threw increasingly difficult challenges and world events at us right until the very end. And, while a good number of businesses have managed to survive and live to stay in operation for yet another year, the year 2021 is also working up to be another unstable road ahead. Just last Friday, the Nonfarm Payroll Employment Change was released, and the numbers are worse than expected. And, unless you’ve been living under a rock, you might’ve also seen the news of the U.S Capitol stormed by pro-Trump mobs.
With all of this in mind and considering the new strain of Covid-19 urging countries to pursue another strict lockdown, it is an understatement to say that we’ll be facing economic uncertainty and shockwaves during the first quarter of 2021. As a result, it is becoming increasingly important for businesses to remain aware, prepared, and steadfast for any potential upsets. So, today we’ll be reviewing simple methods to help guarantee your company’s finances and secure a strong financial position for the months to come.
#1 Comprehensive Analysis of Financial Statements
As we’ve mentioned above, we may have survived 2020, but there’s no telling what 2021 will bring, so we need to gather our bearings and check where your business currently stands. Grab the soonest opportunity possible to do a comprehensive analysis of your company’s financial statements and review how well you did and what you currently have going into the new year.
- Calculating Liquidity: Short-term obligations and any liabilities due within the fiscal year are your current top priority. You must calculate the liquidity ratio and see if you’re capable of meeting your short-term obligations with just your quick assets and cash. If ever the worst-case scenario is realized, and you need to pay off any current outstanding liabilities, you can consider your company safe.
- Asset Utilization: Now, more than ever, is optimization, productivity, and efficiency essential during these trying times. Calculate your company’s activity ratios and determine whether your company is being efficient with its assets or if there is any room for improvement. From inventory turnover to all your receivables, leave no stone unturned.
- Maintaining Profitability: Lastly, you wouldn’t want your business to run on fumes, so you should also maintain a strong profitability ratio. Sure, breaking all-time highs and gaining on average are more than welcome to happen, but we should also be aware that anything can occur, even the worst events. Don’t forget to compare your return on equity and operating profit margin and observe any not-so-good signs or patterns.
#2 Money Management And Investment Strategy
Apart from a technical analysis point of view, you will also want to change your approach to money management and adapt your investment strategy accordingly to these times of uncertainty. We can’t proceed as we normally do, so make sure to exercise extra caution and turn down your risk appetite. A risk-off sentiment will do you much better and keep your company safe for the time being.
- Refrain From Making Big Investments: If you’ve had plans for major expansions or upcoming projects that require allocating a huge budget, please consider holding off and saving them for another time. Yes, big investments will help your turn over a larger profit margin, but having your budget tied down in one place is not advisable right now. If worse comes to worst, you’d have zero immediate assets to keep your business safe.
- Cut Back On Unnecessary Expenses: Any small amount you can cut back on will accumulate and mean a lot more over the long-term, so take out any unnecessary expenses whenever possible. You might also find more inexpensive alternatives that will help bring down overall costs, so research into all business areas.
#3 Take Advantage Of The New Stimulus Bill
As of current, there’s a new stimulus plan in the works, and before it even comes out, you’ll need to prepare the necessary documents beforehand to take advantage of it. Like the one that came before it, the stimulus package aims to inject cash back into the economy, and you’ll need every bit of help to get you by 2021.
- Eligible For Second PPP Loan: If you could not apply for the first Paycheck Protection Program loan or continue to struggle in 2021, please check your eligibility and do so for the second round. Especially for small businesses that need to keep employees, the 24 weeks you’ll get will help save a huge headache.
- Get An EIDL Grant: Another excellent method of acquiring immediate funds and help from the government is applying for the Economic Injury Disasters Loan grant. It can guarantee you better rates and zero need for prepayments or fees. For this option, we recommend working with a professional business lawyer to make the application process proceed without issue.
Hold Strong And Be Vigilant
2021 may have started rough, but that doesn’t mean we should follow in suit. There are plenty of precautionary measures we can take to ensure the financial position of a business, so take this opportunity and don’t be lax. Now’s the time to hold strong and be vigilant, don’t let the world dictate your company’s success and future.