Tips for surviving the recession
Recessionary times tend to ‘surprise’ most business people. It is almost as if the recession sneaks up on them and catches them unawares, which means very few businesses have thought through their strategy for a recession before it arrives. It is important to recognise the four stages to every economic cycle: • • • Down – as the market heads ‘south’ into a bear market; Drag – as the market bounces off the bottom, but drags out in a flat period; Release – the market spikes downward initially but then releases into a new period of growth; Up – the market moves into the new bull market.
By imposing some discipline at the beginning of the sales cycle and monitoring the situation through to the end of the cycle, you should be able to secure a smooth collection of debts, improve cash flow and avoid compromising the relationship you have with your customers. How you can protect yourself:
Conserve your cash and be alert to spending money on items that are not necessary in meeting the goals of the business.
Maintain high customer service levels
Winning customers is hard, retaining them is even more so. Take remedial action when adverse trends are recorded in the following areas: delivery times, customer complaints, customer returns and warranty claims.
Negotiate acceptable credit terms with your customers and enforce them as appropriate.
Take control of the situation • Do not offer credit terms to customers who fail to meet their contractual agreements; Always take up credit references for each and every new customer; Always update these references; Do not offer substantially improved credit terms to customers who have purchased small, but now suddenly want to purchase big; Ensure you have proper credit control procedures in place.
Involve your employees, your greatest asset
Involve the appropriate staff in decision making. Use your staff to garner ‘market intelligence’ by talking to customers and their ordering departments.
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The common problem is that business owners implement strategies behind these cycles, instead of getting ahead of them. The key is to predict accurately when these cycles come into play in an economy and to invest accordingly. Poor cash flow is often a result of poor credit control and the damage caused to your business from incurring bad debts can be considerable. Generally the cost of a single debt is equal to the net profits from a further 15 sales.
Chase your debts and chase them again
Always stop work when credit limits are breached as the damage caused to your business from incurring bad debts can be considerable.
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Don’t bury your head in the sand and take advice
If you are having problems, then tackle them and if necessary take advice.
Know your cash balance at all times
Forecast your cash flows on a regular basis. Be in control and manage your cash position.
Contact Us
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