Beat the Credit Squeeze With Flexible Business Finance by aihaozhe2

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									Five proactive steps a business can take to beat the credit squeeze including business
finance, planning and taking a positive approach to meeting and solving the problems
that might arise.

The credit squeeze is a fact of business life and is not just about money but confidence
in the market too. There are always winners and losers in every business situation and
confidence and business finance can beat the credit crunch.

1. Ensure the bookkeeping and financial accounts of the business are up to date.

Keeping the accounting records up to date is an essential first step to ensuring the
business owner knows exactly where the business stands. Reviewing recent financial
performance and taking positive action to increase sales and margins where possible
and control costs by eliminating waste protects the business from surprises and
downturns.

By having available the recent costs, views and action can be taken to reduce those
costs and in some circumstances to increase business costs where the profit potential
is highest. For example a detailed examination of advertising and promotion costs
may indicate some campaigns should be reduced while the money saved invested in
better performing areas.

Not all sales produce the same profit for the business. By concentrating efforts on the
highest profit margin products and services the effect on working capital can be
reduced which can take the pressure off working capital funding.

2. Preparing a realistic business plan can help the business plan ahead.

Many small businesses prepare a business plan when starting up especially if
government grants or business finance is to be applied for. Failing to prepare an
updated business plan during a credit squeeze can be a plan to fail.

During a credit squeeze a business can find itself operating in an unstable market
where the rules and actions of the past might not be evident in the future. Banks
increase the cost of borrowing, customers save money by leaving the market and
sometimes failing to pay or at least taking longer. Suppliers tighten their grip by
increasing prices and demanding tighter payment periods.

Business takes steps to protect income, cash flow, liquidity and in extreme cases
survival. That is why failing to meet these new challenges is a plan to fail.

Prepare a business plan on the basis of the recent history and extend the financial
results forward following the recent trends. Input into the financial forecast the
opportunities that can be exploited to increase business and take a realistic view of the
potential negative factors that may be suffered.

The business plan should include both a written view of the next twelve months ahead
and include a profit and loss account reflecting the optimistic view and the most
negative view with contingency plans should the worse scenario become a fact. A
cash flow statement calculated from the business plan to show the effects on liquidity
is a vital tool.

3. Improve financial flexibility to increase the business finance options.

Arrange the business finances with more than one bank and increase the number of
financing options. A single bank may not offer the size of overdraft or loan facilities
or the competitive rates the business requires. View the financial market as a
competition between suppliers for your business finance and utilise several to spread
the finance between them.

By maximising financial flexibility options for bank accounts, loans and overdrafts
and financing asset purchases the effect on business progress can be minimised.
Consider leasing agreements, invoice factoring and other specialist financial
institutions in addition to the main bank account provider. Cash flow and working
capital requirements are crucial.

4. Go out and get more sales.

When sales go down it is easy to become depressed. Fight it and remember how the
business obtained new sales channels and customers in the past and exploit the
opportunities in the future. Focus on the unique selling points of the business and its
products and revitalise campaigns to increase sales.

Consider sales and product diversification into both related and other areas. There are
always new opportunities including new products and markets, selling existing
products to a wider audience including increased geographical presence. It may help
to list all sales activities in sales channels and look for more sales channels in which
they company can operate.

5. Ask for professional advice and assistance.

Increase the level of communication with each professional advisor including
accountants, financial advisors, solicitors, bank managers and business advisors and
any managers of financial institutions. The more the merrier and by keeping in touch
more opportunities and more favourable responses will be possible.

There is no such thing as a silly question when the future of the business and its
employees are at risk. Discussing options with a variety of professional advisors
increases those options and if increased business finance is required for growth or
survival in the future, the higher level of personal dialogue will ease that route
forward.

								
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