With a little discipline, good organization and planning, small and mid-sized businesses can safely survive an economic downturn. Here are a few suggestions on how to stay healthy financially:
Manage Your Cash Flow. Focus on the areas where your cash is being held up, such as inventory, equipment purchases, and accounts receivable. By doing so, you will be in a position to improve your current cash flow and predict a future shortfall in cash.
Consolidate or Restructure Your Debt. Bring together debt from loans, credit cards, or other lines of credit. Negotiate with creditors for a longer repayment period.
Look For Ways To Cut Costs. Look at direct costs, gross margins and overhead expenses carefully. You could, for example, cut down on old and obsolete inventory, and save on direct labor by better tracking and creating efficiencies.
Focus On Your Financials and Make Needed Adjustments. Review and use your financial statements on a regular basis to make prudent business decisions. Act on these decisions sooner than later. Forecast quarterly to know where you stand.
Tighten Your Credit Policy. Set stricter terms and conditions for extending credit. You could require a down payment at purchase, shorten the payment period, and only extend credit to select customers.
Use Assertive Debt Collection Techniques. Know when to make phone calls, send written requests for payment with statements, and know when it is time to temporarily stop providing services to a customer.
Carefully Plan for Expansion. It is better to stick to what you are already good at and just try to make it better. If you do expand, create a brief business plan and forecast based on research before expending your time and money on new products and services.
Negotiate With Your Suppliers. Negotiate what you are paying your suppliers. If you have a long term relationship with any of your suppliers then you may be able to get better credit terms.
Focus On Customer Satisfaction. Work on retaining the customer base that you have built up with follow-through, stellar customer service, and quality control. Then, upsell to increase business with these customers.
Know Your Financing Options. Know where to get money before you need it. Some financing options are based on future sales and have flexible repayments, such as invoice factoring or merchant/business cash advances. Focus on building relationships with current lenders, and establish a business line of credit for short-term cash needs.
Seek help to complement your expertise, especially where a lack of your time or a pressing need exists. It can be the difference between success and failure. Contact Mark Hartsell at (949) 629-2520 for a free consultation.