Comments from Bev Budsworth, managing director at The Business Debt Advisor for Stuart Anderson, deputy editor at EN (NW), for their ‘SME Toolkit: Surviving a recession feature’.
Bev gives her top tips for business to survive and thrive in a recession:
-
Review your budgets and set realistic and achievable targets for 2009;
-
Get rid of ‘can't pay / won't pay’ customers;
-
Review debtors list and chase up overdue invoices;
-
Offer existing debtors extended payment terms and / or discounts;
-
Make sure your terms of business contain explicit payment terms;
-
Assign responsibility to one individual for invoicing and collections;
-
Agree extended payment terms with all suppliers, in advance;
-
If appropriate, review banking facilities and discuss future needs;
-
Put extra effort into making sure you have a solid relationship with more favourable customers;
-
Review and flow chart the main processes in your business (e.g. sales processing, order fulfilment, shipping etc) and challenge the need for each step;
-
Encourage team members to suggest ways to streamline and simplify processes (e.g. sit down and brainstorm about efficiencies and cost reduction);
-
Use 'bottom up' budgeting where everyone in the business gives input on areas under their control - target a 10% cost saving;
-
Review your staffing needs over the next 12 months and identify individuals who are surplus to business requirements. Speak to The Business Debt Advisor for advice on redundancies and how the costs can be funded by The Redundancy Fund;
-
Get your members of staff involved in a discussion of likely trading conditions and get their input on reducing costs and maintaining revenues;
-
Review your list of products and services and eliminate those that are unprofitable or not core products / services;
- Review efficiency of business processes and consider alternatives such as outsourcing certain activities locally or overseas;
-
Explain the business strategy to all your employees and get their buy-in;
-
Sales and marketing - often the first budget cut in difficult times - spend should be reviewed but consider the effective, highly targeted campaigns. Opportunities often arise in tough conditions where competitors are weak and not servicing customers properly;
-
Incentivising cost reductions amongst staff can make an enormous difference to their attitude to spend and waste within a business;
- Establish your key performance indicators (KPI's) and measure them on a daily basis; for example:
- Sales leads
- Orders supplied / fulfilled
- Cash balance
- Stock turnover
- Debtor days
- Gross profit
- Net profit