If you run a startup or a small to medium-sized enterprise (SME), you've likely experienced how quickly the tides of fortune can change. Moreover, economic downturns or sudden shifts in the market can take a much heavier toll on smaller business entities than their larger and more established counterparts.
Even if your business has yet to be hit by hard times, it’s vital to have a financial contingency plan in place for when they inevitably come. Proactive financial contingency planning sets you up to sail unharmed through unexpected financial storms and keeps your business on course the whole way.
To craft an effective financial contingency plan, however, you’ll want to be proactive rather than reactive in your approach. The ripples that financial setbacks cause can quickly get out of hand for smaller businesses, and it’s entirely possible for these threats to disrupt or even overturn your operations entirely. Planning ahead helps you reduce these risks and prepare your business to face any challenges head-on.
This guide by Maya Business is designed to outline some essential steps for creating a financial contingency plan that's both practical and tailored to the unique needs of your company. Let’s get started.
Have Access to Reliable Credit
At certain points throughout your business’s lifespan, you may find yourself facing unexpected expenses or difficulties that interrupt your cash flow. In such situations, you’ll need an accessible credit line that allows you to borrow money at relatively manageable rates. Securing business banking loans with good terms does much more than just help you survive a rough patch; it grants you the flexibility to operate and seize growth opportunities even during tough times.
If you do business in the Philippines, then you can depend on Maya Business as a top provider of loans for businesses with favorable terms. Maya Flexi Loan, our credit line developed specifically for SMEs, offers up to PHP 2 million with a hassle-free application process and manageable fees. Another aspect that makes this an ideal business loan product is that you’ll receive the funds directly through your Maya Business Deposit account as soon as your loan offer is approved. In an increasingly unpredictable, ever-changing business landscape, Maya Flexi Loan represents the kind of agile resource that can make a real difference for smaller businesses.
Establish an Emergency Fund
An emergency fund acts as a buffer to absorb the shocks of unforeseen expenses or sudden drops in revenue. In essence, building an emergency fund involves creating a financial cushion that can help you maintain your business's core operations without the stress of immediate cash shortages.
Building this fund might seem daunting, but you can pull together the money you need for it simply by starting small and being consistent. Allocate a portion of your monthly profits to this fund, then gradually build it up to cover several months' worth of expenses. You’ll also need to regularly review this fund and adjust its size in line with your business's growth and changing needs.
Diversify Your Revenue Streams
It’s critical for any business’s financial health to avoid putting all its eggs in one basket and instead have multiple sources of revenue. To diversify your revenue streams, you’ll want to explore different markets or perhaps add new products or services to your repertoire. This approach helps mitigate risks associated with dependence on a single source of income and can open up new avenues for growth and stability.
Start by analyzing your current customer base and market trends. Look for opportunities where your business's strengths align with unmet needs in the market. It could be as simple as offering complementary products or services, or as complex as tapping into entirely new markets. If your business specializes in artisanal coffee, for instance, you might notice a demand in your customer base for eco-friendly coffee accessories. Diversification in this context might involve offering reusable coffee cups or biodegradable coffee pods to meet this demand. This strategy aligns with your existing strengths and taps into a growing market trend towards sustainability, which thereby broadens your revenue streams beyond just selling coffee.
Regularly Update and Optimize Insurance Protection
Insurance is often the unsung hero in a financial contingency plan. Adequate insurance coverage can turn what would have been a catastrophic loss for your business into a manageable setback. Review and adjust your insurance coverage regularly to keep your business protected against a range of relevant risks, from natural disasters to liability issues.
Take the time to understand the specific risks your business faces and discuss these with an insurance professional. As your business evolves, so too should your insurance. This might mean increasing coverage, adding new policies, or even finding more cost-effective options.
Find Ways to Cut Costs Strategically
Cutting costs can help your business run efficiently and stay financially healthy during lean periods. The trick is to focus on costs that don’t compromise the quality of your products or services. Before all else, identify non-essential expenses that you can reduce or eliminate, at least temporarily. From there, you may want to look into streamlining your processes or perhaps even renegotiating with suppliers.
Implementing technology can be a great way to reduce costs in the long term. Digital software systems can automate repetitive tasks, for example, to save time and reduce errors. Similarly, investing in more energy-efficient equipment when you can afford it can help save on utility bills—a lifesaver in hard times. The goal is to create a leaner, more efficient operation that maximizes resources while maintaining the integrity and quality of your business offerings.
Keep Your Finances Safe and Secure with Top Solutions from Maya Business
With Maya Business in your corner, you’ll enjoy access to a wide array of tech tools that can help your business weather hard times and make the most of any windfalls that come your way. Signing up for Maya Business also entitles you to exclusive perks and benefits that you can use to strengthen your enterprise even further.
For instance, your Maya Business account immediately lets you take advantage of a Maya Business Deposit account and use it as your settlement account. With an industry-leading 2.5% per annum interest rate, you’ll earn PHP 25,000 in interest per year on a PHP 1 million deposit. Furthermore, you can send money to your partners and suppliers for free via InstaPay or PESONet. Signing up also qualifies you for a no-collateral Maya Flexi Loan offer of up to PHP 2 million in just 3 months—perfect if you need to take out a quick business banking loan to weather a setback or take advantage of an unexpected opportunity. You’ll soon see why Maya Flexi loan is rapidly becoming the business loan Philippines’ startups and small businesses turn to. Just use Maya Business as your primary processor for all wallet and card payments. The more you use Maya Business solutions, the better the loan offer will be. Open your Maya Business account today and you’ll be able to take advantage of enterprise-class solutions right out of the gate.
