Businesses draw up budgets and financial plans every fiscal year to control operational spending but not every business is preparing for disruptions to “business as usual.” In 2019, only 40% of small to mid-sized businesses consulted a financial advisor in 2019 but 7 of 10 organizations have encountered an average of 3 crises in the last 5 years .
A crisis typically comes around with minimal warning, resulting in financial uncertainty and economic turbulence which without a sound plan can be difficult to overcome. To ensure your organization is in the best position to emerge on the other end of a crisis or disruption successfully, property management companies must respond rapidly but strategically which requires a well thought out plan.
Is the cost of a new client worth the benefit? Or are the expenses going to impact your cashflow? Quantifying the value of your customers, properties, and investments is essential to maintaining cashflow. Detailed reports and close analysis of new properties can offer a clear depiction of how much each property costs to maintain in comparison to the management fees being charged. So, if necessary, it’s easy to determine which properties are cost-centres that can be cut from the portfolio.
Evaluate your operating costs and consider where costs can be reduced. Start small and look at where there is waste in your company and evaluate the price of those expenses. Small energy-efficient or cost-effective decisions can go a long way, reducing overhead costs and increasing cashflow. While it’s not an action plan to actively fight off a crisis, it helps to make your office more prepared and agile.
Disruptions are hard to anticipate but a good financial plan enables agility in your response to fluctuations to both internal operations and external developments. It’s impossible to know exactly when a crisis is coming, what form it will take, how it will evolve, or who it will impact most, that’s why it’s helpful to plug in different variables into your planning – power outages, travel bans or border closures, internet failure etc.
Worst Case Scenario
Come up with an idea of the worst-case scenario for your organization during a financial crisis. This allows businesses to prepare for the absolute worst even if a situation never gets that far. Plan how to navigate the hypothetical situation: the bare minimum of resources, labor, and cashflow that would be needed to continue operating. Reflect and researching worst-case scenarios allows businesses to draft and implement strategic contingencies far in advance of them ever being needed.
Investing in cloud-based property management software equips organizations with the functionality and automation to complete tasks at higher rates and serve communities with minimal operating costs allowing companies to allocate that money elsewhere in the budget. Leveraging technology provides organizations with the infrastructure to grow without hiring additional staff even after acquiring new business which improves cashflow.
Put Together a Team
To effectively create, test, and execute a financial plan it’s optimal to have a specialized team that is always working to keep your company prepared for anything. A group of experts can improve decision making regarding payroll, technology, insurance, and other niche elements during times of crisis. A steady evaluation of a crisis financial plan from varying vantage points can help establish a well-rounded response or defense.
Learn more about how to optimize financial planning during a crisis with AvidXChange’s “How to Get Your Business Back on Track During COVID-19” webinar, Tuesday, July 21, 2020. Sign up here.