How financial and personal loss can sometimes make us stronger
Hi, To The Rescue friends!
This is our second blog post on the new website, and we are excited to share it with you!
We are going to talk about loss in this blog post. Two different types of loss that small businesses experience, as well as personal loss amongst our employees and co-workers, and how that affects us and makes us stronger.
Small businesses lose money for multiple reasons throughout the course of normal business operations. However, monetary losses can’t be grouped into just one category. Companies generally experience either revenue loss, or negative cash outflows that affect the net income that is reported at year end. There are different methods used to address these two types of loss to make a company profitable again.
Revenue loss occurs when a small business acquires less money from operations than expected, due to external and internal factors. Some factors could be the loss of potential customers, or restrictions on business and changes in the market. All of these can lead to significant revenue loss. For instance, if the government places restrictions on trading amounts for investment banks, the banks will experience revenue loss from the missing income they could have received by being able to trade more. Companies also experience revenue loss when technology changes. For example, the gradual decrease of VHS player sales in the 90's resulted in revenue loss at major electronics manufacturers.
Revenue loss is certainly an unfortunate possibility for any small business that is in operation for an extended period of time. If revenue loss occurs for several consecutive fiscal quarters, the company may have to decrease operations, lay off or terminate employees, and a lot of times, a combination of both. For example, if the economy is functioning poorly, and people do not have the money for outdoor skiing equipment, a skiing store might have to move to a smaller location and buy less inventory. However, a positive note about revenue loss, is that it can also encourage small businesses to pursue new areas of business or find other opportunities in the market.
Next, negative cash flows occur when a company's outflows of cash are higher than the inflows of cash for that fiscal period. Typically, cash inflows come from revenue and other income, while cash outflows are a result of expenses and other payments. For example, a small business may bring in $200,000 in revenue for the fiscal year, but if the company spent $100,000 on salaries, $70,000 on inventory and $40,000 on loans, it will have a negative cash outflow of $10,000.
The most common cause of negative cash flow is when a new company opens up and spends more money than it brings in. This new company that borrows money to open its doors, for example, will purchase new equipment and buy all of its initial inventory that will be needed. Resulting with the new company typically spending more money than it will earn in the first few quarters or year. However, if the negative cash flow continues for more than a year, the small business will most likely fail to meet its obligations. Owners must investigate the outflow of cash to determine if waste, fraud or other issues are affecting the company. Budget control is a positive thing that may stop the negative cash flow from occurring again in the future.
These two types of loss can be devastating for small businesses, but they can also make your company stronger after having gone through them. You can learn how to be proactive in finding new opportunities out in the market, and learning to stay on top of budget control can keep from falling back into the trap of spending more than you bring in.
Along with all of this, personal loss amongst ourselves and valued employees, is something all of us face in our companies. Whether that is loss of health, loss of a family member, or an employee moving away due to the military. There are lots of personal losses we as small business owners and employees face, and just like monetary losses, these personal losses are just as important to handle with grace so we come out stronger on the other side.
Here at To The Rescue Bookkeeping, we recently had an employee lose her mother in a horrible way. It was heart breaking for her and all of us as well. Watching someone we care about suffer is never easy, but the way we handle it is important. Being able to surround our friend with love, support and Godly influence was a blessing for us and others to see. We help carry her through her loss, and adjust our strategies along the way as she experiences different stages of grief. She, and all of us will come out stronger having gone through this loss together.
We want you to know that To The Rescue is a company that cares about your businesses, but we also care about you. We care about the losses you are experiencing, and we want to help you through those. Whether it’s a personal loss, revenue loss or negative cash flow, we know how to help. We are here for you.
Thanks for reading! See you back here again soon!