Understand where your money is going
It’s always good to have a big picture understanding of where your money is going. But during times of financial uncertainty, the margin for error is much lower. That means you’ll have to have up-to-date bookkeeping and monthly financial statements so you can see where you stand.
Using a daily cash flow dashboard such as Mint or Pulse will share your cash situation automatically. You won’t have to log in to multiple bank accounts to know whether you’re doing well. Seeing where your money is going on a daily basis will help you see which purchases are necessary—and which ones aren’t.
See where you can cut costs
Once you have an understanding of where your money goes, you’ll be able to brainstorm where you can cut costs. Cutting costs—even small ones—is essential during a recession.
For example, you might see that you’ve been spending $1,000 per month on cleaning services which are not needed when your staff is working remotely. This is money you can save or use for a tool that will make remote work smoother.
Ensure smooth tax filing
The sooner you file your tax return, the sooner you’ll get a tax refund (if you’re owed one).
Unfortunately, if you don’t stay on top of your bookkeeping, filing your taxes becomes much more difficult. You need accurate, up-to-date bookkeeping and financial statements in order to file an accurate tax return—otherwise your accountant will have to spend expensive billable hours getting you caught up.
Plan for the future
The future may be uncertain, but having insight into your finances will allow you to be smart about what you save and where you invest.
Small business owners should plan for two scenarios: an optimistic view where COVID-19 gets contained within a few months and the economy rebounds, and a more conservative scenario with long-term economic fallout for your customers and vendors.
Further reading: How to Create a Financial Forecast
