Financial stress arises due to a financial crisis meaning a person is encountering stress due to unstable financial conditions. It begins with an empty wallet and can further ruin your health if you are not careful.
In the professional world, financial stress may occur from issues like massive debt, fear of bankruptcy, low income, and being jobless. Such situations can lead to the development of anxiety and significantly affect the well-being of a person. Therefore, when dealing with financial stress, it is crucial to take it in the right way, or it can lead to severe problems like self-harming.
Signs of financial stress
How can one identify that he is encountering financial stress? Well, there are many recognizable signs which approve the existence of financial stress. Some of the most common ones are:
- A poor cash flow: Each business experience a periodic dip whenever there is a financial crisis. Some may even shut down. As a result, no money is generated on-site, and cash flow gets shut off as well. Hence, business people encounter financial stress.
- A high-interest debt: Companies that lend money are extra cautious regarding the success of a business, especially when it is a start-up or a new enterprise. This leads to the creation of high-interest debt, which contributes to business owners’ stress.
- High-outstanding receivables:As most companies are encountering the same financial concerns, the amounts of the outstanding receivables have increased massively. This means, if you were expecting a payment from a customer or client within 30 days, you would now have to wait for longer than that.
How one can overcome financial stress
A financial crisis is a business owner’s biggest horror. Moreover, factors like a struggling economy, natural disasters, or diseases (like the one we are witnessing today worldwide) can further amplify the effects of a financial crisis. Therefore, not taking adequate measures immediately when the crisis strikes can worsen the financial conditions or even bring the firm on the verge of bankruptcy. To make sure this doesn’t happen, there are few ways listed below that one should start implementing right away:
- Identifying the primary reason for the financial crisis:
The initial step to overcome a financial crisis is recognizing the primary problem that led to its creation. It can be because of certain internal or external factors. Generally, financial issues are an indication of a bigger problem. Hence, effective and permanent solutions are required to overcome the crisis.
Suppose your business is encountering a financial crisis due to an external factor like the present COVID-19 pandemic. In that case, it is important to realize that things will get better after the pandemic ends. The governments are also taking sufficient measures to reduce the adversities being suffered by businessmen in almost all the countries. However, if the financial crisis is troubling you before the COVID-19 virus erupted, more efforts will be required to restore the stability of your business. Have you entangled your business and personal finances? How are you utilizing your business profits? Are your customers paying your invoices on time? Find answers to such questions to find an efficient way to manage your business’ finances and figure out what is working or needs changes.
- Eliminating irrelevant expenses:
Consistently analyze your business expenses. This will allow you to find out how and where you can reduce irrelevant costs. Find out which operations are causing the most fees. Research ways to cut such costs. Develop healthy communication with the supplier and request them for a discount or a cheaper shipping fee in return for anything that you can help them with.
Avoid tedious, manual processes that do not contribute to profit generation for your business. For example, a tremendous amount of time and money is consumed on accounting tasks like creating paper-based financial reports and invoices. Therefore, switch to an automotive accounting system that can effectively reduce accounting-related costs or hire virtual accounting services.
Make purchasing decisions attentively. There may be an instance where you had spent a lot of money on unnecessary purchases. In order to make it easier to manage purchase requests, make use of procurement software. It can be integrated with your other business processes like accounting and inventory and help them monitor and manage effectively.
- Update budgeting methods:
If you feel you are suffering financial issues due to going over budget, tighten it. Allocate your budget to only those things that are helping in increasing the business profitability. Postpone all your expansion plans, events, or any other activity that can cost you a hefty amount.
To make your budgeting process more straightforward, integrate a financial app within your purchase management. Through this app, you would be able to set parameters so that the budget requests from all the departments or locations can be managed efficiently.
- Building new sales strategies:
Thoroughly evaluate your sales strategies to find out their effectiveness. This way, you can figure the changes that are required to be made. Evaluate the promotions. Have they helped in generating profits, or have they led to losses?
Analyze the quality of your current prospects. Are they meeting your expectations? In addition, shift your priorities towards higher-quality candidates. This will definitely accelerate your sales conversion.
You might also want to replace your existing marketing strategy as well with a more effective one. For example, you might be utilizing billboard ads to market your business, but now it is time to start focussing on digital marketing.
- Monitoring cash flow of the business:
Attentively monitoring the cash flow activities is also very important as it helps in understanding your business income and expenses directly. One can gain helpful insights from here regarding profits and loss of the business, hindrances in the cash flow, and costs that are needed to be cut.
A web-based accounting app can help you to track income from all departments and business units and generate financial statements side by side. Also, effective management of customer’s invoices is necessary as unpaid invoices can negatively impact the cash flow. Therefore, acquire an automotive invoicing system. It will automatically send invoices, track them and issue payment reminders to customers before they get due.
- Professional support:
Professionals can aid your financial stress by providing optimum solutions at the correct time. If you have ever encountered a bankruptcy-like situation, then you should consider seeking professional support. Finance management experts can manage your financial stress and consult on how to square off debts and loans.
Coming to mental health, it can be challenging to handle financial stress on a regular basis. Therefore, it’s necessary to practice self-care. Keep your mental health in good condition by taking frequent breaks to loosen up every day.
It can sometimes be tricky for people in business to meet deadlines, review proposals, and make decisions, especially for those running an accounting firm. However, dedicate some time for yourself, and you will notice the difference in the stress levels. Don’t take stress or be worried regarding your finances and their influence on your business.
We are part of an innovative world. There are ample resources to attain clarity and overcome financial stress. No matter, what the reason for your financial stress is, there always is a solution. Try to maintain focus and deal with your financial stress in an effective manner.