Checklist for managing in times of financial difficulty

Posted on 24th January 2013 by Christabelle Harris

To improve the CASH POSITION of your business

  • Prepare regular cash flow forecasts
  • Generate cash flow through sales but do not undersell your products or services, i.e. do exchange price for volume
  • Only pay sales commissions once payment is received
  • Negotiate extended terms of trade with suppliers
  • Take modest personal drawings or wages
  • Don’t hide any problems from your bank. Tell your bank early if you need money to overcome a cash flow problem

To improve the PROFITABILITY of your business

  • Prepare financial statements on a regular basis and use them to analyse performance and benchmark your business against industry averages
  • Understand the profit you generate on each item of stock or service you provide
  • Concentrate on improving sales of your most profitable stocks or services
  • Don’t discount prices on lower margin products and services
  • Don’t discount on your most profitable products or services unless the discount encourages increased sales that lead to at least the same point

To control COSTS

  • Identify the expenditures that are essential to keep your business running. Don’t cut these costs
  • Look at cost carefully, but don’t criticise every transaction
  • Conduct a review of your business processes to see whether some expenses can be eliminated completely
  • Direct marketing expenditure towards direct response advertising (e.g. direct mails, emails and coupons)
  • Review staffing arrangements
  • Work to retain good staff. Remember that replacing staff can be expensive

To reduce your CUSTOMERS’ DEBT

  • Keep in regular contact with customers, particularly customers who have outstanding debts
  • Prepare an aged debtors report
  • Negotiate periodic payment if that helps customers to clear overdue amounts
  • Before you sell to a customer on credit, perform a credit check and agree on proper commercial terms of trade
  • Encourage your customers to pay immediately by offering discounts on cash sale, for example

To control STOCK

  • Keep the right amount of stock – too much and not enough stock can damage a business
  • Identify slow moving and dead stock and try to sell it. If you can’t sell it, write it off and destroy it
  • Identify items you simply must never run out of
  • Negotiate deals with suppliers but avoid volume-based discounts
  • Tighten the buying of stock by knowing when to buy. To do this you will need to know the volume sales per item.
  • Don’t let discounts drive your buying decisions

To improve SALES

  • Focus on the most profitable sales. Don’t chase just any sales
  • Create added value with your offers by providing a gift or training, for example
  • Undertake companion selling and up-selling
  • Use in-store signs to highlight the product of the week

If you wish to discuss any of these further please contact GeersSullivan on 9316 7000

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