Prior to COVID-19, business owners were already working with their financial teams to help prepare the company for uncertainty. Specifically, the business’s CFO takes on a role that ensures that your business will be able to weather unexpected events.
Today, your virtual McAllen CFOs at Murray & Kirchner CPA, LLC will explain the importance of financial planning before a catastrophe, as well as how a VCFO can assist you through this process.
Unforeseen Events That Could Become a Business Crisis
If there’s one thing that the pandemic has taught us this year, it’s that the unexpected can occur at any time. When you’re unprepared, an unexpected event like the coronavirus could become your company’s greatest vulnerability and its downfall.
Unfortunately, there are many other unpredictable events that could also affect your business.
Other potential events that could result in a business crisis, if unprepared, include:
- Death: What is your continuity plan if a company founder or majority owner dies?
- Divorce: A family-owned business could face disruptions because of divorce.
- Injury or disability of key executive: Does one key executive have all of the expertise or data necessary to run the business?
- A financial hardship: Is your company’s cash management where it needs to be to weather unforeseen events? Do you have access to lenders for emergency liquidity?
- Loss of key salespeople: A sales-driven organization could suffer losses if key salespeople are unsatisfied or lost.
- Loss of important client/customer: If a majority of your revenue comes from only one client, you risk significant losses from this lack of diversity.
- New government regulations or taxes
- Public relations nightmare
- A natural disaster: A natural disaster can not only threaten the lives of your employees and customers but also devastate your company financially.
But wait, there’s more:
- Legal dispute: You always take the chance that a customer will file a product liability claim or some other legal case that threatens your business.
- War: The threat of a military conflict on U.S. soil is low, but still exists.
- Political unrest: The world is ever-changing, and there’s a possibility that political unrest could impact your business.
- Competition: There’s a real risk that a competitor will develop a better product or outmaneuver you in other ways.
- Supply chain disruption/failure: An unexpected event for a supplier could affect your business, too. You might also lose trusted suppliers for other reasons.
- Loss or corruption of customer data: Data breaches are becoming more common and could tarnish your reputation with current and potential clients.
- Disruptive innovation: Your product or service may have been “cutting edge” at the moment, but a new disruptive innovation may be a threat.
- Mutiny: Although seemingly unlikely, this problem could mean doom for your business.
- Failure of product or service: If a product or service suffers a failure, your whole business could be in trouble.
- Transportation strikes: If you depend on shipping for materials or to deliver products, disruption in the transportation system could damage your reputation and bottom line.
Though some of these examples may seem far-fetched, all are possible events that could put your business in financial peril to some degree.
Preparing Your Business for Unexpected Events
An outsourced CFO can help your business be as prepared as possible for any circumstance by organizing and guiding your company’s contingency plans in the following ways:
- Create a Continuity Plan: This should be a top priority.
- Draft Necessary Legal Documents: If your business is privately-owned, there should be legal documents outlining how the business will continue running in the case of the death or disability of a major stakeholder.
- Have an IT Plan in Place: You want to prevent data breaches, and your IT department should also have set plans to allow the business to continue operations in the wake of any unexpected situations.
- Inventory Resources: Determine the state of your resources. Can you liquidate resources if necessary? Do you have a plan to decrease outflows quickly to save money while recovering from a loss?
- Use Scenario Plans: Use scenario planning to implement strategic plans around a variety of situations that could impact your business, both short and long-term.
- Ensure Access to Cash: Determine your company’s current reserves. Have you established the right relationships with lenders if your cash management needs change?
- Strategies for Response: Whether it be a natural disaster, a product failure, or a PR event, having strategies for response ready will improve the chance of a positive outcome for your business.
At Murray & Kirchner CPA, LLC our VCFOs know how to use the tools of accounting and financial planning to help business owners make the most suitable decisions.
Dedicated Financial Assistance From an Experienced VCFO is Only a Phone Call Away