There is hardly a day that goes by without hearing about the struggling economy and you may be concerned about how your business will cope in the "credit crunch". Good business and financial planning is always important, but especially so in an economic downturn.
If your business is feeling the pinch, it's more important than ever to look at what you can do to help your business. Here are some ideas to get you started...
1. Debtor Management. Encourage your customers to pay more promptly, by giving small discounts or just by chasing them as soon as the invoice becomes due. Send out invoices for completed work as soon as possible, and for long term projects ask for stage payments on account. Be vigilant with your customer's payment trends. You may be able to spot potential problems before they develop into something more damaging. If customers are becoming increasingly difficult to contact or cheques are suspiciously delayed it may be beneficial to investigate further.
2. Shout about best value! If you have a range of products or services, look at emphasising best value items in your marketing. People will be looking for best and added value in products they buy at this time, make sure that they know you have them available!
3. Talk to your bank. Keep your bank in the loop, particularly if you are going to have a need to secure extra funding or renew existing arrangements such as overdrafts. If fees are being increased it may pay to look elsewhere, many banks offer good deals to customers who have switched to them.
4. Got cash? If you are cash positive, turn the crunch to your advantage. Some businesses may be keener to make a sale so those with cash may be able to negotiate some great bargains, particularly for early payment!
5. Employees. While some job cuts may be necessary you should try to maintain your key employees: their strengths will help you through an economic downturn and you will need them when business picks up. You should use any dips in the market as an opportunity for key staff to develop new skills and coach newer members. Keep employee motivation up and maintain a good communication with your staff to prevent a decline in morale. If you do have to make cuts consider asking staff to change their working hours to part-time or flexi-time, with an appropriate drop in total pay. Or to take their holidays now if business is slow. If a skilled member of staff is about to retire ask them to stay on part time, as this may be cheaper than recruiting a new employee.
6. Do you rent an office? If you rent an office you could ask your landlord if you can change the rent from quarterly in advance to monthly. Or with improvements in technology perhaps now is the time to consider runing your business from home to lose the office rent altogether!
7. Keep on marketing. Whilst cutting back on costs can be necessary in a recession and the marketing budget is often the first casualty, but it may prove a false economy if sales suffer. Whilst others cut back on their marketing, you may be able to use this to your advantage and keep on marketing to get a larger share of the present market. If you do not have a strategic marketing plan, now is the time to do one!
8. Negotiate with your suppliers. Look at the agreements you have with suppliers for continuing services, such as energy or cleaning. Can you renegotiate any of these contracts to get a better deal?
9. Reduce tax payments on account if you are a sole trader. Review the projected tax payments for your business. Payments on account for unincorporated businesses can be reduced and reclaimed if you are confident of the taxable profit figure. This is a good reason for getting the accounts completed quickly after the year end and for getting your purple envelopes in to Mazuma quickly!
10. Beware of cutting prices. If receipts being to taper off it can be tempting to cut your prices to try and attract more business. But beware! This can be a mistake. In a recession your costs may inflate and as a result you may have to raise prices to cover this expenditure. Cutting your prices can also have the negative effect of devaluing your image in the marketplace. Remember that your suppliers may raise their prices as well, so try to negotiate a long term discount with them.
Don't forget that if you use our Purpleforce monthly service you will have monthly management accounts that will help you make decisions about your business and help you to plan ahead.
If you are not already a client why not email us to see what we can do for you and your business?
DISCLAIMER - PLEASE NOTE: The ideas shared with you in this newsletter are intended to inform rather than advise. Circumstances do vary and if you feel that strategies we have outlined may be beneficial it is important that you contact us before implementation. If you do or do not take action as a result of reading this newsletter, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.
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