Ups and downs are part of life, in the same way, profit and loss are also a part of the corporate world. One can’t deny the situation; the only choice is to tackle the circumstances with a calm mind and sharpness. Financial loss is considered a loss of money or a decrease in finance. In this non-payment, no remittal, default – loss resulting from the failure of a debt to be paid. Capital loss – the amount by which the purchase price of an asset exceeds the selling price; the loss is realized when the asset is sold.
It is referred to as damage suffered by an individual or group of individuals due to faulty service done by an organisation or company. These losses are not directly connected to an individual but to his business or livelihood activity.
Some signs of financial loss all over the world are
- Increase litigation cost
- Overpower technology
- Financial claims
- Increased rate of liability
- Aviation claims
- Data leakage
And many more
Some examples are:
- The non-collection of cash on
- The notification of the supplier address against explicit instructions of the sender
- Exceeding the delivery period
Financial loss in business
The world of corporate always required a person who can take risks and risks involved 50-50 per cent chances of profit and loss. Financial loss in business is a situation when an organisation or company is suffering from a huge gap between cash coming in and cash going out. In this scenario, cash outflow is always greater than the cash inflow which is termed a loss.
There can be innumerable reasons for financial losses in business.
Some of them are listed below
Loss or reduced income/profit:
Every person is concerned with his or her income or salary as it is a necessary entity to run the life of an individual. Anyhow, if this amount gets affected then it can come out as a headache or a problem with the question of how to run life? This is one of the rolling issues in covid-19 when thousands of people lost their job or were not paid.
The situation also becomes repressive when an individual saw expenditures more than expected which can disturb the whole budget.
Fails in managing the cash flow
If a person fails to manage the use of current resources adequately then it directly shows the decrement in cash flow which can cause serious financial loss and recovery become a hurdle in business. This usually occurs when the main lead role of the company is not well experienced or not concerned with his work.
Economic collapse is a period in which a country’s economy gets shattered and its reconstruction may take several years to complete. This usually happens during a pandemic time or at a time of war.
Decrement in trade shows direct relation to a company’s trade rate which result in Bankruptcies, loss of merchant volume and can become a major cause of financial stress.
A financial crisis is defined as any situation where one or more significant financial assets – such as stocks, real estate, or oil – suddenly (and usually unexpectedly) loses a substantial amount of their nominal value. Common examples of a financial crisis include financial market crashes – either widespread or within specific industries – housing market crashes and bank runs. A bank run happens when large numbers of bank depositors panic and seek to withdraw, all at once, all their funds on deposit with their bank.
Loss of merchandise
It refers to any type of loss identified as missing money or inventory that should be present but isn’t actually on hand or saleable. It can come in myriad forms, such as customer theft, damage, bookkeeping errors, internal theft, or vendor fraud.
This is one of the common problems in business.
High turnover rate
The turnover ratio or turnover rate is the percentage of a mutual fund or other portfolio’s holdings that have been replaced in a given year. One should try to maintain turnover percentage. Its high value can prove as a huge loss for your business.
Not handling finance well
In the corporate world, ill management of finance may make your business more prone to collapse. In the business world, it is suggested to keep all records of cash inflow or cash outflow with assured details. Otherwise, it can come out as a big blunder in business.
Businesses are always required to keep track of their accounts if a person is not spying on the finance then he/she can’t run his business for a long span.
Financial stress is the term mostly used in the corporate world to define upset Ness of mental health of an individual due to harsh loss in his business.
In this situation, a person feels handicapped and crippled from his business and corporate side. This type of stress can cause headaches, depression and high blood pressure etc.
Financial loss insurance
“Prevention is better than cure”
Financial loss insurance justifies the above statement
Financial and insurance is a way to manage your risk.
When we purchase insurance then we are trying to purchase protection for our business and resources through insurance.
If any mishappening or loss will be encountered in the coming time then an organisation or an individual will get some return of that loss.
Insurance provides security to our business and helps in its smooth running with minimum losses. It is mainly defined on a policy that is called an insurance policy which is a written contract between the policyholder or insurer.
Type of insurance
- Health insurance
- Life insurance
- Disability insurance
- Auto insurance
Points to keep in mind when looking for an insurance policy
- Research about the company whose policy you want to purchase
- Read the document carefully
- Try to find out what factors matter so that you can get the coverage you need at the best price.
Now it’s time to find out the solution to the financial problems. Some of the solutions are written below:
Accept the current scenario
Whatever the situation is, how worst the circumstances but the only option or the solution is to face it, try to accept the state of affairs and in spite of denying the facts and figures, realize the dilemma. This will help an individual to take the steps according to situation demands.
A calm mind and avoid impulsive action
First of all, try to cool down your mind and bring some peace to your life. Don’t take actions in a hasty manner like withdrawing all investment, stopping cash flow and other undesirable actions.
Analyse the situation
One should understand and assess the whole circumstances realize your strength at that time which helps you to come out of the situation. Try to fit the appropriate block at an appropriate location.
Rebuild in spite of repent
Try to come out of your emotions and reconstruct your corporate world again. Take professionally help or advice, judge things on the basis of your situation and implement them as much as possible.
Way of passive income
One should try to find out the way of passive income can help him when active income gets halted.
Passive income is defined as the best way to make money with a one-time investment for example
Giving building/ shops on rent.
Learn from mistakes
Try to look at all ifs and buts of the situation which fall you in this circumstance and avoid them as much as possible in the coming time.
Further Reading :