You've probably heard the saying "there's no point locking the door after the thief has broken in." The same goes for your company's finances. Don't fret when an international or even local crisis impacts your business. One thing is certain: change will always come, and the biggest ones usually come during moments of intense market tension and stress. The philosopher Heraclitus famously said, "Nothing is permanent except change," so get ready, it will come.
If you, like me, believe in the relentless force of change, you might think that when it arrives, you'll be one of the most adaptable given your open mind and heart. However, I suggest leaving aside the confidence of those who have already faced numerous challenges and built their own successful companies. adopt preventive measures such as establishing an emergency reserve fund.
According to research (03/2020) by CNDL-National Confederation of Shopkeepers and SPC, less than half of Brazilians have the habit of saving, and it is observed that this practice also transcends to our companies.
Accustomed to crises Brazilian entrepreneurs know that in turbulent times, resources become scarcer, money disappears, interest and exchange rates soar overnight, customers disappear, and suppliers delay orders.
A reserve fund allows you to deal with these challenges with greater peace of mind and even find opportunities using this liquidity. It will also be important for negotiating deadlines with clients and suppliers, renegotiate debts with financial institutions, deal with protests and negative entries. In short, Making difficult decisions in times of crisis is always more expensive and risky than having some preparation and reserve to avoid feeling like someone has pulled the rug out from under you..
Convinced that an emergency fund is a good idea? So now comes the question: How much should this fund be? Accounting provides for capital reserves and profit reserves, but that's not what we're talking about. This is a strategic fund to weather the storms of the future. entrepreneurship and the risks of changes in the business environment. This measurement is not easy and depends on the current condition of each business.
Typically, you start by guaranteeing a short-term commitment period for the company, whether it's a week's payment or a month's bank debt. The important thing is to start with an achievable goal and, once achieved, increase it until it reaches market standards, such as a month's revenue.
Now you might be thinking that if it were easy, anyone would do it. Certainly, the life of an entrepreneur is a constant struggle, so I'll give you a tip to help you with the challenge of raising more funds for your reserve fund.
If your company has been operating for several years, you may not stop to consider how much resources you've already invested in your business. Look at the company's balance sheet to see how much capital is allocated. customers, stocks and suppliers, there is a great source of resources normally neglected by the commercial routine.
Carefully manage sales deadlines, stock levels and spend time securing payment terms with your suppliers, which naturally your working capital will drain precious cash from the firm.
Reading this article was already a first step, now building the reserve is up to you.
Good work and good business.
Cláudio Lustosa holds a Master's degree in Controllership and Administration (2011) from the Federal University of Ceará, an MBA in Corporate Finance from Saint Paul-SP (2015), a Specialist's degree in International Business (2006) from the State University of Ceará, and a Bachelor's degree in Economics from the Federal University of Ceará (2004). He has over 15 years of professional experience in the financial sector, with emphasis on national and international corporate finance. He currently holds the position of Financial and Foreign Trade Manager at Grupo Aço Cearense.
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