Experts predict the recession will continue until the end of 2010, followed by a slow recovery. However, small businesses are better placed to adapt to change and weather the storm. And those businesses that prove themselves to be more flexible now will find they are in a position to continue to grow when the worst of the financial crisis is over.
There is quite a lot that can be done now to beat the recession. Here are a few areas of your business you should be paying particular attention to:
Cashflow. The first thing you should do is review your cash flow as that will determine your current position. Estimate whether you can still pay expenses should your revenue decrease. It’s helpful to run some ‘what if’ scenarios e.g. loss of a main client, decrease in sales revenue, delays with client payments. Check all upcoming expenses, customer orders, and unpaid invoices. Are you in a reasonable position or do you need to take drastic action now?
Accounts Receivable. You’ll need to increase your cashflow so start chasing those outstanding invoices. If you have a good accounting system that keeps accurate records this will really help you to keep on top of your unpaid invoices. Be aggressive but not impolite when pursuing clients. Offer customers a discount for settling their accounts sooner, such as 1-2% off for paying within 10 days. And you’ll need to consider closing orders or reducing services to those who are not paying or paying too slowly.
Accounts Payable . Try to save money with suppliers, inventory and utility expenses. Speak to different companies and check what better pricing they could offer you. See if your current vendors are willing to match any lower prices. Ask for better payment terms (e.g. 45 days rather than 30).
Put off any major purchases of any non-essential items. Reduce travel expenses where possible by using phone or video-conferencing. Look into negotiating more favorable rates for any outstanding loans taken out more than six months ago.
Unfortunately, you may not be able to afford regular staff social events and big Christmas parties this year, but there are still ways to let your employees know how important they are to you. Be creative and think of other ways to treat them.
Customers. Now is the time to make sure you are providing excellent customer service. It’s much, much easier holding on to existing customers than finding brand new ones. Over-deliver on expectations.
Look for ways to get more business from existing customers. Ask customers what new products or services they may need and consider whether there is anything else you can provide. Ask for referrals.
Try to find out how your customers are coping financially to avoid providing credit if they seem to be having difficulties.
Employee Involvement. Communicate with your employees; they should be aware of the difficulties your company is facing. They may also be able to offer ideas on ways to increase revenue and reduce costs. Include them in your recession-busting plans and they will be motivated to work extra hard for you. If you can avoid lay-offs by cutting everyone’s hours by 10%, do that. Your staff will understand it’s in everyone’s best interests.
Advertising/Marketing. Increase your advertising and marketing efforts now, but look for lower cost avenues such as the internet. Get a website if you don’t already have one. Learn about web marketing techniques such as SEO (Search Engine Optimization) and pay per click advertising.
Inventory. Monitor your inventory very closely. Try keeping less stock (including office equipment and supplies) to lower costs. See if your suppliers can deliver more frequently. Get rid of your worst selling products now.
Promotions. Offer special offers and discounts to increase sales, however calculate costs carefully before discounting prices to make sure it’s still worth it for you.
Credit Cards. If you do not yet process credit card payments, consider obtaining a merchant account. Some of your smaller customers may need to pay by credit card if they are having cash flow issues.
Now is also a good time to obtain quality accounting software. There are excellent free accounting software options on the market, such as QuickBooks Simple Start. It’s really important to be able to see all your financial data in one place so you can determine exactly how your business is doing and you can make sure you have enough cash to pay your suppliers. You’ll also need to check your Profit & Loss statements often.
Accurate forecasts will help you keep an eye on the near future and reports will help you make those difficult decisions. And keeping good tax records now will make sure you claim for every deductible business expense you can.
QuickBooks accounting software can help with all of this. It grows with your business too; so when your business comes out of the recession and starts growing again, your accounting data can be easily imported to the next level of accounting functionality.
It’s important to remain positive and to keep moving forwards. Remember all the efforts you put in place today will result in your continuing business growth.
