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