As a business owner, you are probably well aware of the term “financial stress”. Running a business involves vigilance and careful planning. The main factor to upkeep your business is to have full control over your finances. If internal or external disturbances occur, that proves to be a threat to your financial performance then it can result in extreme financial stress. However, it is possible to learn ways to manage it better. We have covered 10 ways to reduce financial stress in this blog. These proven strategies will help you to take command of the distress situation.

It is essential to learn how to decrease the chances of financial stress in the first place. However, it is very difficult to avoid feeling financially stressed from time to time. Therefore, it is better to be prepared in advance and acquire knowledge of handling financial stress productively.

Conduct A Stress Test:

Before jumping into the 10 ways to reduce financial stress, let us learn how to reduce the risk factors causing financial stress by performing a stress test for your business.

The economic conditions are constantly changing. They affect the businesses in every way, especially financially. As we have no control over the economy, we can prepare for the uncertain changes. One of the ways is to stress test your business by following the 3 simple steps:

1. Request Expert Financial Advice:

Several nonprofit advisory boards are working all over the world to help out small businesses by providing mentoring. It is a network of volunteers, that includes retired C-suite executives.

They provide confidential business advice online as well as through a local chapter. You can meet several mentors via email or even video chat.

These experienced volunteers are experts in all aspects and stages of business development.

 2. Estimate Worst-Case Scenarios:

The wisest way to prepare for the stressed conditions is to forecast the maximum amount of loss. Study the current economic situation and project the dramatic budget crises.

By doing this you will be able to evaluate the loss and how it is going to affect your business. this will ultimately empower you to make informed decisions like how to cut down on expenses and bring diversification in your clientele beforehand.

3. Evaluate Your Financial Cushioning:

The financial cushion is the extra amount of net cash flow remaining after the expected debt service. To conduct the stress test estimation of the financial cushion is very critical. Because even in worst cases having a backup can reduce the fear.

The experts suggest a 6-month reserve at least, you can increase according to your feasibility. Calculate your expense rate to estimate the amount of money you are going to spend in the next 12 months. This will help you evaluate your needed cushion.

10 Ways to Reduce Financial Stress

Here are some useful business strategies that you can use to get out of financial crises effectively:

1.  Quick Invoicing:

The first thing you should do after providing a service or sending goods is promptly sending your invoice. You can speed up the process by motivating the customer using some encouraging terms as “get a 2 % discount if you pay within 10 days” but do mention that the “full amount is due in 30 days” in any case.

Once you have sent the invoice, keep following up. This can be done efficiently by automating your email or using an SMS service and reminders may also be built into your accounting software.

2.  Increase Your Knowledge:

Gain more knowledge about the stressing factors and understand uncertainty to overcome stress. This is the easiest way to combat anxiety. When you know how to deal in certain conditions in advance then no financial crunch can harm your mental health. Hence you can plan and make decisions more effectively to aid your business finances.

There are numerous resources to learn about the financial aspects of your business so take advantage of it and expand your knowledge.

3.  Organize your Finances:

It is an essential way to avoid getting into difficult situations ultimately resulting in financial stress.

It becomes haywire when you have to track your spending under duress.

However, if you organize well from the start, then it can save from the risk of cash flow problems and compromised budgeting decisions.

So get financially organized to get a better view of where your company stands.

4.  Inculcate Good Accounting Habits:

If you keep track of your cash flows every day, you will stay aware of your financial position as it relates to your budget. This practice will keep you informed and mentally relaxed. For this purpose, you can either implement an effective accounting system in-house or outsource your bookkeeping services to a professional.

The most intelligent option would be to hire a bookkeeper to stay on top of your finances. It is very important to manage books to see where your business stands. By regular report generation, and regular review, of course, you can respond to financial crises more sensibly and minimize the problem by taking early actions.

5.  Implement Money-Saving Ideas:

One example of saving money ideas can be renting rather than buying any equipment. This can save you a lot of cash that can be utilized elsewhere. Moreover, renting equipment also saves the repair cost in case of any damage.

Similarly, you can rent an office or simply work from home. Coworking is another very smart approach, especially in the early stages of your business. Shared offices and coworking spaces like Sterling Spaces, where we are now located, offer flexible terms and a prestigious address without the expensive and long term commercial leases. This can be made possible even if you have employees by encouraging them to work remotely. This will spare you and them, an enormous amount of money.

Surely there are numerous other ways to spend less money and save more. Look for ways suitable for your business and implement them.

6.   Never Adopt Illegal Ways:

When finances get tough the small business owners get tempted towards shady practices. It is an unethical act and can land you in hot water. Stay strong and honest because getting into illegal activities or practices can cause an elevation in the stress level rather than reducing it.

7.  Choose an LLC or INC

One way to reduce financial stress is to opt for an LLC if you live in the United States, or Incorporation if you live in Canada. These types of companies offer limited liability protection and will offer protection of your assets in the event of a lawsuit or court case. Choosing to run as a sole proprietor or partnership may put your home, car, and other personal assets at risk, if they win the case.

So always choose an LLC or INC shield for your liabilities. We recommend and have partnered with Ownr to help with setting up your entity correctly and affordably.

8.  Manage Your Marketing

Nowadays it has become very easy to do your marketing. The internet and social media allow managing your public relations effectively. You can conveniently engage with people on a personal level with the aid of free social media accounts!

There are other means of online marketing such as building your business website and putting quality content on it. Content is king and it attracts more website traffic leading to more conversion rates.

9. Take Care of Your Mental Health:

10. Hire a bookkeeper

Last but not least, our final suggestion to reduce financial stress on the list is to hire a financial bookkeeper. For a small business owner, it is pretty much a solo performance where one person has to keep everything in check be it marketing, sales, accounts, or say every aspect of the business. It is very important to keep your financials in order so that your business flourishes smoothly.

If you are stressed due to dispersed invoices and receipts. Consider hiring an expert and free up your mind. Centrosome Inc. is a bookkeeping firm that offers a full array of bookkeeping and accounting services. We are based in Ottawa, Canada, and helps small businesses with bookkeeping in Canada and the United States.

To learn more about the services we offer at Centrosome Inc. please click here, or read what our clients are saying about us, here. If you have any questions about how we can help you, contact us.