As the owner of the CPA firm Haga Kommer, Aspire Bank, and Aspire Insurance, Toby Kommer knows numbers. He has helped countless businesses scale, balance budgets, and overcome financial disasters.
Of course, you never want to face a financial disaster, but what if you do? We asked Toby that very question.
Q: What are some typical financial disasters businesses face?
A: It almost always comes down to cash. Cash flow is the root of almost all financial disasters and cash flow issues can come from a few different areas. A company could lose a top client. Or, the most common thing I see is a top client running into financial issues. There have been many situations where a top client is a great payer for 20 years and then all of a sudden, they can’t pay—that can put a cash flow crunch on a business.
Q: What are some things companies can do to avoid this?
A: A lot of people, when it comes to personal finance, will have 2-4 months of expenses saved in the bank in case something happens. I think from a business perspective, it’s wise to do the same thing. Obviously, each business is unique in terms of the overhead they have and all of the other factors at play. But overall, it’s a good practice.
Q: If a business does find themselves in a financial crisis, what are the first steps they should take to address it?
A: In the technology realm, I think almost every business has a disaster recovery plan. They have a plan for what to do if they get hacked. They have a plan for if their technology is down for two days. They have a plan for if their server is damaged. Even companies that aren’t in the technology space will have their data backed up or they’ll have a second server.
I don’t see enough businesses that plan for that and are prepared in that way for a financial disaster. One thing they could do is have a line of credit readily available from the bank. I think the first step should be accessing a line of credit.
Before that even, businesses should have plans in place for both short-term and long-term issues and a healthy amount of cash reserves. Businesses should also have a plan for restructuring the company in place.
Q: How common is it for businesses to not have a plan in place?
A: I would say it’s extremely common. I would say it’s almost uncommon to see somebody who’s actually given some thought to a plan.
