How Businesses can survive a downturn.
The secret to surviving a down economy is cash flow. It’s important that you reduce and slow down cash outflows, and increase and speed up cash inflows. This will better position your business for this recessionary environment we find ourselves in.
Our Highview Partner and CPA Dave Sheahan, outlines some ideas you can proactively implement within your own business today:
Budget & Cashflow
- Prepare a monthly/weekly budget of expected income and costs.
- Calculate your break-even point.
- Reduce overhead/expense costs.
Sales & Income
- Concentrate on your core business & profitable areas.
- Tap into existing customers – get them to keep supporting you.
- Expand customer base by offering something additional to entice new ones.
- Look at competitors offerings & exceed them.
- Take larger deposits upfront.
- Chase your outstanding amounts now, arrange to get part payments if the full amount cannot be paid and agree to a date for the remainder.
- Take larger deposits at the start of jobs.
Your Suppliers – extend terms
- Contact suppliers and advise your situation, they will be in the same position. Discuss deferring payment, or paying over a period of time.
Value your Employees
- Be open and honest, and keep communicating with them regularly.
- Offer them to take leave, offer reduced work days (e.g. 3-4 days a week instead of full time).
- Review the Government stimulus for employers.
- Ask them for their ideas – get them involved.
Your Lifestyle: Keep it Simple
- Reduce your spending and owner withdrawals
Reduce your Debt & Repayments
- Sell any assets that are not required (e.g. two good cars on finance, sell one and buy a cheaper one to reduce monthly loan repayments).
- Re-negotiate your borrowing interest rates with the bank/financier, or ask for a reduction of loan payments for a period.
- Contact your bank/broker/equipment firm (check their website) to see if your repayments can be placed on hold for a few months.
- Negotiate reduced rent for a period.
- Landlords are better off taking a reduced rent rather than no rent.
- Reduce inventory held, look for other suppliers – but do not sacrifice quality.
- Review your business interruption & travel insurance & check your cover.
Focus on Quality
- Maintain or raise quality/service level. Your customers will notice this.
- Review the different stimulus offerings – view the latest information here: https://www.highview.com.au/the-latest-on-the-coronavirus-stimulus-package/
Get Professional Advice
- Contact your accountant, adviser, broker, mentors, insurers etc -you’re not alone.
- Speak with your Highview accountant. Get help to review your figures, and have a cashflow budget of income and outgoings prepared for each month, and for the next six months so you can truly understand where your business is positioned.
- We’re here for you, just a phone call or email away.
Article written by Highview Accounting & Financial Partner & CPA, Dave Sheahan.