Safeguard your business
With interest rates climbing and a potential tightening of spending, it makes sense to take steps to protect your business from events outside your control.
Here are some ways to prepare for stormy waters ahead.
- Build reserves by freeing up cash within your business, such as selling equipment you no longer need, liquidating excess inventory or raw materials, and looking closely at the business assets on your balance sheet, to see what you don’t need, and sell.
- Do a cost analysis while maintaining or improving efficiency. Document every step of your business process to improve your capacity to do more with less.
- Diversify into new growth markets (even in times of crisis some businesses will thrive)
- Widen your product or service mix, negotiate better terms with suppliers, amend your terms of trade to collect money faster, cease any part of your business that doesn’t make a profit, and scale back non-essential staff.
- Keep a close eye on and fix anything that may impact your gross profit margin such as increases in raw materials or product costs, wastage during production, loss in quality which increases customer returns, or late paying customers.
- Tighten credit control by requesting deposits or progress payments, use credit scoring systems to reduce poor paying customers, set appropriate credit limits, credit check all customers, monitor late payments, and follow up early with bad debts.
- Sketch out cash flow scenarios to identify what your business would look like in the future where sales drop (or cease) over a period of time, and develop contingencies in advance. For these scenarios, consider extra cuts you can make, the revenue you need to break even and the length of time it takes to recover.
- Protect your supply chain by identifying risks to your business if suppliers were suddenly no longer able to deliver. This is especially critical if you have exclusive or hard to replace materials or products as part of your own delivery. Develop an alternate supplier plan and consider reaching out to these businesses as back-up if your existing suppliers can’t deliver.
- Find new revenue streams through finding different customers or markets, developing new products or services, or finding new ways to sell to your customers.
For informational purposes only. There is NO WARRANTY, expressed or implied, for the accuracy of this information or its applicability to your financial situation. Please consult your financial and/or tax advisor.