The following article outlines a number of ways to help business owners safeguard their business from sustaining losses during tough economic conditions throughout 2017.
Identify & Manage Risks
Regardless of size, location and industry, every business is susceptible to sustaining some kind of loss, financial or otherwise, from internal and external risks. As a business owner, if you don’t identify the risks that are unique to your business, prepare for them and manage them using a plan, they could lead you down a path that ends in insolvency. Some risks are magnified during tough economic times.
If you don’t have a risk management plan in place, now is the time to act.
The first step in this process is identifying the risks to which your business is exposed. This occurs during a Risk Assessment Briefing conducted by a professional. Contact our team to book a briefing today!
Very rarely does a business owner have the human resources and funding required to prepare for, and manage, all potential risks. Therefore, protecting your business from risks requires a level of strategic decision making because, as the owner, you need to make a judgment call in allocating the priorities to be given to the various competing calls on your business needs. It’s a balancing act that isn’t always straightforward, especially if your business is complex. Strategic decision making is the foundation of an effective risk management plan. We can help you by providing practical legal advice to aid you in making these key strategic decisions.
Insurance is crucial if you want to protect your business from financial loss. Insurance acts as a backup in case the risk management plan fails and an emergency (unidentified risk) strikes. Very few businesses could financially sustain the losses that would be incurred if they had to fight and lose a legal battle, all because they failed to get the appropriate insurance. There are many types of insurance that are relevant to business, including public liability, asset protection, professional indemnity, key person protection, revenue protection, workers compensation insurance and product liability. Every business is different and typically requires different levels of insurance, so it’s recommend you seek advice before making any strategic decision related to insurances for your business.
“Insolvencies remain at stubbornly high levels…the sticky elevation and upward trending of insolvency numbers is concerning” Macquarie Equities (Dec, 2012)
Insolvency rates are on the rise in most industries. As a business owner, one of your biggest risks is customers becoming debtors. Maintaining a positive and sustainable cash flow should be your top priority and this is impossible to achieve when you are waiting idly for debts to be paid. Instead, you need to consider developing effective debt recovery and credit control policies. This means putting a proper debt recovery system in place to recover your debts, quickly and efficiently. In doing so you will always be aware of how much your customers owe, who those customers are and when it’s appropriate to take debt recovery action against them.
Business contracts are one of the best and most cost-effective ways to protect your business from numerous risks, especially when financial transactions are involved. Many small businesses become insolvent simply because they fail to recognise the importance of contracts and/or they use contracts that are not professionally written by a lawyer to be solid and flawless in every aspect. A prime example is the business owner who tries to save money by searching for ‘Free Contract Templates’ in Google, and then edits those templates without consulting a professional.
Contracts are not a one-size-fits-all solution because every business is different.
Avoid all the risks associated with flawed contracts by seeking legal advice.
Business losses come from many different areas and often occur because the owner failed to identify and prepare for particular risks.
If risks are not identified and managed, these losses could be devastating.
Our advice is to safeguard your business from potential loss by not only by being aware of the risks that could lead to your business becoming insolvent, but also by taking the correct steps to protect your business right now.