Financial risk management has been ingrained in leadership in most industries for some time. These are people who can not only reactively handle potential threats or risks to the company in this manner, but can also proactively plan to avoid threats that might be burdensome later.
If your business is a smaller one, it’s entirely possible that one of the many hats you wear actually covers financial risk management. And that’s not a surprise. Often the most hands-on business owners will also be expected to take on financial risk mitigation on the job.
Two stories from the online business news community — one in Forbes, and the other in The Street – give advice when it comes to financial risk management. Each is from a panel of business experts who clearly have seen some of these scenarios in action. Here’s a look at some of their advice:
Don’t mix personal and business funding
Resist the temptation for ease of use and make sure funding for business and personal is completely kept separate. The Forbes article notes that this arrangement protects personal assets from risk while also making capital access and tax planning easier. Clarity is key.
Prep for sudden drops in revenue
This one may have been more relevant recently for some businesses due to the pandemic response, as the authors of the Forbes piece note. Having some kind of safety net, including an open line of credit as one example, is important to help cover operating costs.
Consider strong insurance coverage
This is a big one, and both articles cover it in some way. The one in The Street notes that while insurance isn’t as top-of-mind as retirement plans or investments, it should be. Being protected from financial risks via a licensed dealer makes sense for most businesses that may take on risks. The Street article suggests going through a fee-only financial planner for your insurance, to avoid those who might have conflicts of interest due to commission sales.
Align loans with the debt payment ratio
This one is suggested by The Street and it might seem counter-intuitive for those who want to pay down debt quickly. At the same time, these experts suggest a measured approach so that you can take advantage of tax breaks or tax-deductible interest, or very low fixed rates. It’s also a good idea to take that reduction money per month and put it into business savings.
Making revenue objectives come to life — with a handle on the risk factors — can be a rewarding part of any business. As one of your partners, ARO can maximize your revenue objectives through voice message campaigns or collection programs.
To find out more about what we can provide you, go to our website.
