Chartered Accountants & Insolvency Practitioners

Managing your Business through Recession

Turnover is vanity, profit is sanity and cash is king.

With firms likely to fail due to lack of cash, not profit, it is more important than ever for business managers and owners to find ways of improving cash flow. So what measures can you take?

 

C

ash flow forecasts:

Ensure your comprehensive monthly forecast details money coming in and out, as well as the cash balance or overdraft requirements. By reviewing this regularly, you can predict future needs and negotiate well in advance.

A

ccounting and performance measurement:

Your management accounts must contain robust key performance indicators, so you can take action if a department is not performing well.

S

queeze working capital:

Reduce your inventories, work in progress and accounts receivable as much as possible without harming the business. Turn these into cash as soon as possible to maintain your cash flow.

H

ang on to your key customers:

Your clients will also be suffering in the current economic crisis, so offer outstanding service to the top 20 percent of your customers to build loyalty and long-term relationships. They provide 80 percent of your profit, after all.

 

I

nvest in technology and marketing:

Now is the time to invest in your business to ensure you maintain your competitive advantage and that your products reach as wide an audience as possible.

S

tability:

Keep calm, show leadership and make people believe you are in control. While there will be many factors you can’t control, focus on the ones you can and make any necessary changes.

 

K

nitting:

We are not suggesting that you diversify into woollen garments; rather that you bring together the essence of your business and focus on what makes you great. Non-core activities should be outsourced, so that you do not waste time on them.

I

nitiate and inspire:

Improve productivity by innovating new processes and inspiring your employees.

N

egotiate:

By reviewing your cash flow forecasts regularly, you will be aware of upcoming financial needs and be able to begin negotiations early with stakeholders – whether they are your bank, employees, suppliers, shareholders or even the government.

G

oodwill:

Deliver on your promises to ensure customer loyalty and maintain your goodwill and reputation.

Effective cash management in the current economic crisis could mean the difference between success and failure. Remember, cash is king!

 

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