Financial contingency planning is a must—not just for established small businesses, but also for businesses in the earliest stages of formation.
Without a financial contingency plan in place, unforeseen events can be harmful to the health of a business.
What is a financial contingency plan?
A financial contingency plan should document your course of action in times of crisis that threaten the stability of your company. It should focus on resource and financial allocations in particular.
It can mean the difference between the survival and failure of a business when disaster strikes.
A comprehensive plan aims to limit the risk of financial loss that can be invaluable.
How to create a financial contingency plan
1. Create a list of your priority resources- Not all your business’s resources are crucial to its operation.
2. Consider the potential risks- Make a list of possible risks and give some thought to how likely each of the threats is to occur and when they are most likely to occur (conducting a SWOT analysis can be helpful here). Creating a strategy for each risk on how to minimize the risk.
3. Determine how to execute the plan, and who will be responsible for what- Take the information above and determine who will be responsible for executing the financial contingency plan.
4. Review regularly—make sure your plans are up to date- To make sure the financial contingency plan is relevant and up-to-date, it’s essential you revisit and revise the plan on a quarterly basis as the business grows.
5. Consider the capital requirements first- decide what’s best for the business first and then think about where the money to implement the plan will come from.
The truth is, there’s no substitute for proper preparation, and putting plans in place if the worst should happen can provide reassurance and respite during a financial storm.
Are you unsure about how to create your financial contingency plan and how you can implement it in your business? Contact us today, because to us, you are more than just a number.
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