Some tips on how a business can survive tough economic times
Manage Cash Flow
Managing cash is critical; a business needs to be able to pay its staff
and its suppliers. Without these resources a business cannot trade. Cash
inflow from sales needs to be quickly and accurately updated. In order
to achieve all this, it is vital to have an accurate record of your bank
accounts, and to regularly check them by doing bank reconciliations. A
Cash Flow Forecast can then be drawn up, taking into account money due
to be received as well as money due to be paid, so that arrangements can
be made with suppliers or the bank if there will be cash shortfalls.
This needs to be kept up to date and reviewed regularly.
Manage Debt Collection
credit history of new customers and having credit terms and credit
limit policies in place all help to prevent customers from running up
large debts or, worse still, defaulting. Prompt invoicing reduces
queries and credit notes and encourages prompt payment. Very few
customers are happy with late or inaccurate invoices. Offer settlement
discounts from prompt payment. Having accurate up to date customer
details and status is vital to enable effective and efficient debt
collection procedures. A business needs to know what amounts are owed
and when those amounts are due to be paid.
is important to monitor expenses and cut back where possible. Having
budgets in place helps to warn when expenses are getting to high and
comparing to historical data is useful. Using Purchase Orders will
ensure that when the Supplier Invoice is received, the quantities and
prices are automatically checked. Effective ordering systems ensure
getting the best prices for goods and services. Try and negotiate better
terms and prices from your suppliers. Keeping accurate and up to date
records of all expenses is essential to ensure cash flow management.
Inventory (Stock) Control
many businesses, inventory ties up the majority of cash resources. It
is therefore vital to manage this resource to reduce wastage and keep
stock holding at an optimum level. Having stock shortages can lose you
customers, and over stocking ties up cash. Stock levels, costs and
locations need to be up to date and accurate to ensure customer
satisfaction and profitably as well as consuming the least possible cash
Improve Staff Efficiency
Salaries and wage
bills are also a major expense for many businesses. Employees need to
spend their time at work as efficiently as possible. From an
administrative point of view, each source document should be handled by
as few people as possible. For example a Purchase Order should be
generated and thereafter, the Supplier Delivery Note and Invoice, should
just be checked against the Order and processed and not recaptured. The
same applies to Customer Orders, Delivery Notes and Invoices. In a
manufacturing environment, production schedules need to be planned and
optimised, to ensure workers can produce the end products as quickly and
efficiently as possible.
Know your Market
In order to
boost sales, it is vital that you understand as much about your target
market as possible. Some of the questions that need to be answered are:
- Which products are your best sellers?
- What customers buy which products?
- Which products are most profitable and which are the least profitable?
- What other factors affect sales, for example locations, sales reps, seasons etc?
- What is the source of your customer leads and prospects?
- Which advertising platform will best reach your target market?
you have answered these questions, you can make informed decisions
about where to concentrate your efforts and which areas you need to
re-evaluate. This is a time to concentrate on your core business and to
do that, you need to understand it well.
Keep Your Customers
cost of acquiring a new customer is up to thirty (30) times that of
keeping an existing customer. An existing customer is someone that needs
to be valued. Your existing customers bring you repeat business- a
happy customer will tell a few of their friends, an unhappy customer
will tell most of their friends. Never under estimate the power of word
Some of the main ways to keep a customer are:
- Providing excellent, personal service.
- Providing good value for money.
- Quick efficient fulfilment of orders.
- Listening to your customer.
- Keeping your promises.
- Keeping in touch with your customer.
Have a Strategic Plan
business needs a strategic plan. You are unlikely to succeed if you
don’t have a goal and an idea of how to achieve it. Often this goal is
simply survival. Work out some risk management measures and understand
your core business principles. It is also important to recognise that
surviving is a team effort. Communicating honestly with your staff and
keeping them informed ensures they feel part of the team.
“Individuals don’t win in business; teams do.” – Sam Walton
What tools can help?
is fairly obvious from all the point above that having accurate, real
time data and records is an essential factor. This is where an
Accounting or ERP software solution can invaluable. It enables staff to
function efficiently with information being easily available across all
the different areas of the business and with the capturing of data done
at a single point. It enables reports and analysis to be extracted and
keeps information current.
All the tips mentioned above are
interrelated. You cannot give good service if you do not know if you can
fulfil an order. You cannot extract Cash Flow Forecasts if you do not
know what your commitments are and when and what your customers are
expected to pay. Without the ability to extract good sales analysis
reports, which uses information from customer and stock transactions,
you will not know your market.
“Know your numbers’ is a fundamental precept of business.” – Bill Gates
Accounts is a cost effective, scalable and fully integrated ERP and
Accounting solution with all the features necessary to efficiently
manage a business’s resources.
Back to Articles