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External Influences on Your Business & its Cash Flow

Being aware of external influences that will potentially impact your business (and cash flow) can make or break your operation. 

Consider managing your business decisions when dealing with external influences that could potentially have a large impact on your operations. In these situations, you need to preserve your cash flow while operating strategically. 

Thinking beyond the numbers, there are many external influences that could impact your business’s cash flow. And while “external” factors imply they are beyond your control, you can absolutely control your reaction to these factors and even anticipate their arrival in order to reduce the impact on your business. 

Consider these common external factors: 

  1. Political - given the state of the current political landscape from the recent election, preparing for political factors should be easier than other less-predictable sources of change. You know the platforms and suggested policies of incoming parties and can prepare your business to face them. Stay informed by reading or watching the news and keeping up with current policies that affect your business.  
  1. Economic - how the economy as a whole impacts your business. When the economy is down, it’s good to find ways to keep cash flow moving. Look into following up on accounts receivable before others begin to face economic hardship and may not be around to pay. 
  1. Social - how the demographics and social norms of your target market impact your business. This may change as the economy changes, but you can typically predict the social influence on your business based on your location, targeting, and other operations that take demographics into account. 
  1. Technological - as technology changes, it will influence your business. Advances in technology may be a setback for some businesses (or advantage to others). For example, utilizing the internet to open a new distribution channel could help improve cash flow, however, it may also allow for the purchase of the same products at a cheaper price. 
  1. Competitors - a competitor’s behavior can always influence your business. If a competing store moves into town or a large retailer offers a discount on the same product you sell, you will need to adjust your strategy. 

How can you manage business decisions when it comes to external influences? 

When the influences on your business are not decisions that are controlled by you, it’s easy to feel powerless. But by realizing the potential external factors and how changes in those areas might affect your business, you are already a step ahead. 

And while you can’t control the factors affecting your business, you can absolutely control your reaction. 

Whether you are flexible and divert to a backup strategy to maintain cash flow when certain roadblocks occur, or you are conservative in your spending from the start to preserve your cash on hand, these are all strategies to preserve your business operation during external influences. 

Of course, your strategy needs to make sense for your business. So, research the external influences that may be relevant to your industry and see what potential opportunities there are to pivot into preserving your cash flow. 

Conclusion

If you are a more visual learner, using accounting forecasting software can help predict certain scenarios that may occur if some external influences are applied. 

While we can’t account for every possible scenario, running the theoretical numbers through a program to anticipate your business’s reaction is another way to prepare yourself for the worst possible outcome. In fact, many businesses affected by COVID shutdowns may have survived had they implemented types of forecasting or had a plan to pivot cash flow based on external factors.  

For more information, or to get started forecasting, check out dryrun.com

See if Dryrun is a fit for you.