Financial problems: How to handle them?

Financial problems in companies can lead to various scenarios where financial health is at risk or threatened by debt, stagnation, low profitability, bankruptcy risk, etc. Therefore, it is essential to anticipate these situations if possible.

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However, if anticipation is not possible, it is crucial to have the necessary tools to provide effective solutions that minimize risks and prevent future problems.

What are financial problems?

Financial problems are unforeseen events in a company that result in deviations from the previously planned financial trajectory, requiring immediate corrective actions by executives to avoid substantial losses that jeopardize the company's continuity.

We often assume that resolving financial problems is solely the responsibility of the finance department. However, this is a misconception, as all areas contribute to achieving predefined objectives set by the management. If one or more areas fail to meet the set goals, these poor results will have repercussions on the organization's finances, and a financial problem can jeopardize the entire company.

The objective of this article is to identify the most common financial problems that can arise in a company and provide possible solutions to prevent their recurrence in the future. Here, we present a list of practical tips to successfully resolve financial problems.

1. Financial restructuring.

Restructuring is a proactive measure that can help you identify the causes of financial problems, such as debt to suppliers. By evaluating your company's weaknesses, you can eliminate them and focus on strengths. This will prevent further damage and allow you to work on resolution and ensure survival.

In this regard, you can create a new task execution plan that minimizes the number of errors. For example, if you are facing difficulties in the sales department, develop a new sales funnel that improves the process and engages customers, fostering successful business relationships.

2. Specific actions to improve cash flow.

If you have cash flow problems, your company may be at risk because without incoming money, you cannot pay bills, invoices, and other business expenses. You must closely monitor cash flow whenever possible to manage it effectively.

Firstly, collect your debts. We understand that the world is going through a health crisis that has also caused a significant economic downturn, but waiting indefinitely for your debtors will not help you move forward.

Consider taking an inventory of your stock, as you may be accumulating unsold quantities of certain products. If you already have a large quantity of a particular product, it is advisable to halt production and move on to another product. This way, you can save resources and increase sales.

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3. Organize your expenses.

Creating a list of monthly payments and prioritizing them can be a good measure to reduce financial problems. No matter how small the expense, it should be included in this list. Determine which payments are urgent, which ones can be delayed, and which ones can be eliminated.

Every company has unnecessary expenses in its budget, but when financial problems arise, these become dead weight. Another way to regulate expenses is by seeking more affordable suppliers and resources or negotiating better deals with existing ones.

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4. Prioritize debt repayment.

If you find yourself in a situation where you need to pay off your debts and creditors are pressuring you, explore the fastest and available means to settle your debts. This may involve considering options such as taking out loans, leveraging personal assets, or offering discounted prices on products to collect the money.

If you are unable to handle the debt on your own, hire a professional accountant to assess your debts and current financial situation, so they can advise you on the next steps without making hasty decisions.

Once you have some funds, start by paying off the most urgent creditors and continue until you can settle all your debts.

However, do not fall into the trap of reducing staff to recover sufficient funds to pay off debts. Holding employees accountable for the poor decisions of managers is unfair, unless there are truly necessary and justified layoffs.

In the present day, employee layoffs incur much higher costs for a company due to severance pay than retaining staff.

5. Expand your customer base.

Without a solid customer base, there can be no profitable business, and in the long run, you are likely to encounter various financial problems due to low sales. To achieve this, concentrate your efforts on motivating customer purchases.

Additionally, try developing customer service communication channels to address their urgent complaints and feedback. Through digital marketing, you can also drive conversion by attracting more customers who will be passionate about your products and promote your brand.

It is essential to genuinely care about your customers and ensure that your campaigns focus on providing products or services that meet all their needs and expectations. Maintaining a steady flow of sales is one of the best strategies to avoid financial problems because as long as there are profits, there will be no debts.

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In summary, if you have noticed that you have financial problems that threaten the finances of your company, put these tips into practice and you will see that you can solve them much faster than you expected and without making great sacrifices or making decisions that negatively affect third parties.