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10 Critical Steps Companies Should Take NOW

Now that we are officially in a recession, prudent business owners will want to “storm proof” their businesses for the coming year.  As you struggle to reduce costs, find new sources of revenue, and operate more efficiently, it’s always good to remember some basics.

1.         Stay on top of your cash situation

Take time to prepare cash flow projections for the

 next 12 months and revise weekly if needed.

2.         Know your key drivers and manage them

Keep a careful eye on areas that affect cash flow:

accounts receivable collections and inventory turnover.

How are you doing compared to past performance and

your peers?  Watch key areas that affect profits, net and

gross margins, labor and fixed asset utilization.

3.         Monitor Accounts Receivables closely

Process invoices immediately, distribute an

outstanding accounts receivable statement weekly

and take action on late accounts immediately.  Start

with a polite but firm personal call and don’t

get off the phone without a commitment to a

payment date.  A few days improvement in collections

will make a huge difference in cash flow.

4.         Insist on good financial data

Accurate, timely financial statements are critical in

tight economic times. Don’t accept excuses.

5.         Get funding now!

The worst time to get financing is when you are

about to run out of cash.  Arrange for loans and

Lines of credit before you need it.  Your cash flow

Projections from tip one will help you figure out

How much you’ll need and when you can pay it back.

6.         Review your long term financing

Are you financing long-term growth (or assets) with

short-term funding such as a credit line?  If so,

see your banker about getting it changed

7.         Have good advisors and use them

Make sure you have a solid team of outside Advisors,

meet with them regularly and listen to what they say.

8.         Don’t turn financial decisions over to others

There’s no need to turn yourself into a CPA, but you must

Be able to read financial statements, talk with financial

People and assess your company’s performance.

9.         Understand and use break-even analysis

Do you know your contribution margin?  If not, you

Won’t know how much more you need in sales when

Costs rise or prices fall.  At the same time you’ll

know how much to cut when sales fall and analyze

the need for expansion or capital decision.

10.       Stay close to your clients

This will generate good will for you, give you a chance

To spot new opportunities and provide an early

warning in the event their industry isn’t doing well.