Get Through a Recession Successfully part 2

By: Doc Rabbit


Recommended Best Practice Activities

The Nuts and Bolts… The following list of suggested best practice activities is crucial for your business' survival and for its growth in a recession. The actual financial stability of your particular business, at the start of a recession, will dictate the priority and speed of the implementation of the following best practice activities.

1. Diligently check your cash flow:

Estimate your cash flow monthly to ensure that expenses and planned expenditures are in line with accounts receivable. Incorporate cash flow statements into your monthly financial reporting. Project cash necessities three-to-six months ahead. The key is to know how to monitor, protect, control, and put cash to work.

2. Meticulously convert your inventories: Convert excess, obsolete, and slow-moving inventory items into cash. Contemplate returning surplus and slow-moving items back to the suppliers. Close-out or inventory reduction sales work well to resize your inventory. Also, think about narrowing your product offerings. Well-timed order placement helps to lower excess inventory levels and occasional material deficits. The key is to reduce the amount of your inventory without losing sales.

3. Timely collection of your accounts receivable: This asset should be exchanged to cash as quickly as possible. Offer prompt payment discounts to instigate timely payments. Make changes in the terms of sale for slow paying customers (i.e. changing net 30 day terms to COD). Invoicing is an important part of your cash flow management. The first rule of invoicing is to do it as soon as possible after products are shipped and/or after services are fulfilled. Place an emphasis on decreasing billing mistakes. Most customers delay payments because an invoice had mistakes, and therefore, will not pay until they receive a corrected copy. Email or fax your invoices to save on mailing time. Post the payments that you have received and make deposits more regularly. The key is to develop an effective collection system that produces timely payments and one that gives you advance warning of problems.

4. Re-focus your concentration on your existing clients/customers: Make customer satisfaction your first concern. A regular analysis of your customers' buying history and frequency of purchases can disclose some interesting facts about your customers' buying habits. Contemplate signing long-term contracts with your main clients/customers which will add to your security. Give a discount for advanced cash payments. The key is to do what it takes to keep your existing customers loyal.

5. Re-negotiate with your suppliers, lenders, and landlord:

i) Suppliers: Always keep your negotiations on the level of need, saying that your company has reviewed its cost structure and has established, that it needs to decrease supplier costs. Tell the supplier that you value the relationship you have grown, but that you need to get a cost reduction urgently. Ask your supplier for a reduced material price, an extended payment cycle, and the removal of finance charges. Also, see if you can buy material from them on a consignment basis. In acknowledgment for their price concessions, be willing to agree to a long-term contract. Examine the idea of bartering as a form of payment.

ii) Lenders: Everything in business finance is negotiable and your relationship with a bank is no different. The first step to successful renegotiations is to convince your lenders that you can conclusively pay off the renegotiated loan. You must point out to your lenders why it would be in their best interest to agree to a new agreement. Showing them your business plan and your action plan that includes your cost-savings resourcefulness, along with "the how" and "the when" of the implementation of your plan is the best way to attain this goal. Explain to them that you will need their mutual effort to insure that you can survive, as well as, grow your business during the recession. Negotiated items include: the rate of interest, the needed security to cover the loan, and the start date for repayment. A start date for repayment could be immediate, within several months or as long as a year. The key is to realize that your lender will work with you, but that frequent and on-going communications with them is important.

iii) Landlord: Meet with your landlord. Explain your need to have them lengthen the term of your lease at a lower cost. Make sure you have a clause in the lease agreement that enables you to have the right to sublet any or all of the leased space.

6. Re-evaluate your work force requirements: This is a very critical area. Salaries/wages are a major expense of doing business. Therefore, any reduction in the hours worked through work schedule changes, short-term layoffs or permanent layoffs has an instant cost saving benefit. Most companies ramped up hiring new employees in the good times, only to find that they are presently overstaffed due to decreased sales during the recession. In terms of down-sizing your employees, be very careful not to reduce your employees to a level that forces you to neglect customer service and quality. Consider the use of part-timers or the current trend of outsourcing certain operations to independent contractors.

7. Shop for better insurance rates: Get quotations from other insurance agents for comparable coverage to find out whether or not your present insurance provider is competitive. Also, consider adapting your coverage to reduce premium costs. The key is to have the right balance-to be properly insured, but not under or over insured.

8. Re-evaluate your advertising: Contrary to the other cost-cutting methods, investigate the possibility of increasing your advertising expenditures. This method realizes the advantage of the reduced "noise" and congestion (fewer advertisers) in the marketplace. The downturn period is a great opportunity to increase brand awareness and create added appeal for your product/service offerings.

9. Seek the help of outside advisors: The use of an advisory board comprised of your CPA, attorney, and business consultant offers you objectivity and provides you with professional advice and guidance. Their collective experience in working with similar situations in past recessions is invaluable.

10. Review your other expenses: Target an across-the-board cost- cutting initiative of 10-15%. Try to remove unnecessary expenses. Tightening your belt in order to weather the recession makes practical and financial sense.
Proactively managing your business through a recession is an big challenge and is crucial for your survival. However, through well-planned initiatives, a recession, can create tremendous opportunity for your company to gain a bigger market share. In order to take advantage of this growth opportunity, you must act quickly to implement the above best business practices to continue realigning and resizing your company to the present economic conditions.

For more help on dealing with the present global recession, check out the following url, enjoy :)

http://www.plrmember.com/re/re65.php

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Hope you had a good read, now stay in the lead ! All the best, stay safe and keep on growing ! Cheers Don DocRabbit webmaster @ plrmember.com The place to become a PLR Ace ! An ebook Goldmine, Free membership Signup !

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