Financial risk management is one of the most critical aspects of business management, and it is more crucial for small businesses as a dealbreaker in survival. Small businesses may operate on a thin margin and limited reserve funds than more established businesses. So, mitigating the major financial risks and being prepared to tackle the unforeseen challenges may decide the growth and sustainability of the company over time. In fact, financial risk management for businesses can be a very complex topic, and the approach to the same may differ from business to business. Here, we will discuss some generalized tips from a financial management expert.
Business financial risk management tips from Kavan Choksi
Kavan Choksi is a well-known business analyst and financial advisor who helps many businesses to attain financial stability and growth. Here in this article, we will listen to a few important points shared by Choksi in terms of better managing the financial risks of smaller businesses.
1. Know the weak points
In order to control the risks, it is essential to understand the risks at the first point. For this, you need to first outline the major weaknesses of your business. You have to ask some key questions like
- What are the monthly cash needs for your business?
- Are there any vendor options if anyone goes out of the business?
- Is there anything you can sell out that is a must need or option?
Once you know all your strong and weak points, it becomes much easier to address those.
2. Be knowledgeable
Risks always offer opportunities too. What makes you fail in risk management is your ignorance. So, gain more knowledge about potential business financial risks and ways to curb them. Any part which seems risky for you is something that you may not have understood fully. List these down and try to find a credible source to clarify your queries and doubt.
3. Have a proper financial accounting
As your business demands, hiring a qualified and experienced accountant to manage your business finances is essential. With a professional accountant on board, it will become much easier to maintain accurate records, do budgeting and forecasting, and tackle financial risks.
If you are a small business and not in a position to employ a senior accountant, it is also possible to avail accounting services on an as-needed basis.
4. Have a mentor
Many small businesses now are family businesses or start-ups by aspiring new entrepreneurs. To run it well, one should thoroughly understand their business in light of the supporting market. What they usually lack is industry knowledge and clarity gained through experience. So, it is ideal for getting advice from reliable and expert mentors to understand the financial risks and ways to tackle those.
While handling financial risks, it is essential to have proper planning in order to understand, accept, manage, and covert the risk into an opportunity for growth and learning. Kavan Choksi advises the support of a good financial management consultant who will help you to sail through the risky situations smoothly and attain success.