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Some tips on how a business can survive through economic times

Some tips on how a business can survive through 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

Checking the 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.

Watch Company Expenses

It is important to monitor expenses and cut back where possible. Having budgets in place helps to warn when expenses are getting too 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

In 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 overstocking 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 resources.

Improve Staff Efficiency

Salaries and wage bills are also a major expenses 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?

Once 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

The 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 to repeat business- a happy customer will tell a few of their friends, an unhappy customer will tell most of their friends. Never underestimate the power of word of mouth.

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

A 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?

It is fairly obvious from all the points 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

Omni 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.