About Me

I am A Chartered Certified Accountant who does a bit of gardening.
The Pictures of the flowering and non-flowering plants, fruits, vegetables, culinary & aromatic herbs
in this blog are of my garden.
Most of my garden collections are driven by the Fs: They either Flower, have a Fragrance, provide Flavor, bring Fruit, Food or are air Freshening.

Tuesday, 23 January 2018

HOW TO SURVIVE A RECESSION

Image Credit http://startuptipsdaily.com
Business as with life has its ups and downs. There are times when everything is going on well and there are those times when you have to tighten your belt to survive. In this article we will look at some tips on how to cope when the economy and conditions for business are not favourable.
First and foremost, TRACK YOUR FINANCES DAILY
This you should start today if you haven’t. As a car has a dashboard so should a business have a financial dashboard and the three main gauges would be:
Your profit and loss statement. This is like your speedometer. It measures how fast your business is growing. At a quick glance, you can tell if the money you’re making is more than the money you’re spending.
Your cash flow statement. This is like the gas gauge in your car. It measures how far you can go with your existing cash before the car (your business) conks out.
Your balance sheet. This is like an oil pressure indicator on your dashboard. It shows you how much risk you have in your business. Too little, and your car won’t have what it needs to run. Too much, and you could blow a gasket!
Install a key indicator system to track your business and have daily, weekly, and monthly reports issued. Follow profitability per job, per week, per client, per product. Use these indicators to focus on your most profitable products or services. Make nothing that does not bring in a profit.
Monitor your cash flow very diligently, and forecast it monthly to ensure that expenses and planned expenditures are in line with your accounts receivables. Make sure your financial statements provide information that is timely, relevant and accurate. Cash flow statements are superior in this regard to income statements and balance sheets. Be able to project where you will stand three months in advance
Secondly, EVALUATE AND ELIMINATE DEBT
The second tip on how to survive a recession is to evaluate and eliminate excessive debt. If your revenues have dropped, you may not be able to service the debt you took on when your revenues were much higher. Any debt can be worked out -- secured debt, loans, mortgages, lines of credit, and even leases.
Strengthen your banking relationships, which includes letting lenders know the company's financial position. Banks are looking for business to boost their income, but are also trying to minimize risk, so they are careful about what kind of loans they undertake. Most experts agree, however, that seeking additional credit during a recession is not advisable.
Separate the "nice to do" from the "have to do," and eliminate nonessential expenses as much as possible. Ask yourself, is that activity necessary? If not, don't do it. Also consider cutting personal spending. Simple solutions such as brown bag lunches and car pooling can make a difference.
In a related vein, look hard at capital spending. Consider delaying both the purchase of high value items and expansion plans that take a long time to pay off. At the same time, make sure you have enough capacity to start filling orders again when the economy stabilizes.
Reduce or stretch out debt, and build up your capital reserves. Watch the credit-worthiness of your customers. Remaining close to existing customers, and checking to see how they are getting on during the economic downturn, not only helps avoid unpleasant surprises but could also lead to new opportunities.
Thirdly, TRAIN AND CROSS-TRAIN YOUR STAFF
After about 6 months into my first job as a fresh graduate, the company had to undergo a restructuring due to business slow down. I was performing the accountancy role and the MD had a secretary-cum-receptionist. They had to merge all these roles into one job holder. The Secretary couldn’t do any accountancy work, but I could do some secretarial and receptionist work.
The Secretary-cum-receptionist had to be let go. I retained my accountancy role and added on the secretarial-cum-receptionist roles. While one employee sadly lost their job, I actually got a salary increment for the additional duties that I assumed. Of course I didn’t get the secretary’s full salary but I got enough to motivate me to carry the extra load and the company many a good saving.
If every job or task is learned by at least one additional person, when the primary person is out, the secondary person cross-trained to perform the task can leap in and save the day. And so work continues, and productivity remains high despite the absence of a key player.
Get employees involved in policy choices as well as tactics and implementation -- asking, for example, if costs can be cut 15 percent without layoffs. If layoffs or a significant reduction in work hours are unavoidable, let employees take a lead role in designing the program. Shortened hours, job reassignments, job sharing and other alternatives may surface.
Meet with staff regularly to exchange ideas on boosting productivity and other issues. Create an incentive for good suggestions, and foster a team spirit for survival.
Remember that employees need to feel they are important to your company, and that their work is challenging them up to their full capabilities. "Do what I tell you" management styles need to be replaced, because small businesses whose owner or managers are "the whole show" can definitely benefit by encouraging workers on all levels to contribute their expertise instead of just following orders. This is especially true during lean times when challenges to business success are greatest.
Finally, FOCUS ON CUSTOMERS
We focus on what every business cannot exist without, and that is customers. For without them there will be no sales and without sales there will be no business.
You should focus all of your efforts on retaining regular customers and maintaining your relationships with them. Make sure that they know that their business is appreciated. In addition, keep your quality just as high as before, even if you've had to make other cuts around the business.
A recession is also a good opportunity to evaluate your customers. You may have those customers who are not profitable to work with. A recession is the perfect time to sever these relationships and seek new ones while dropping off unprofitable customers. The natural urge is to hang onto every customer, but use the spare time the recession provides to analyze your customer base and find out which ones are the most profitable and which ones are costing you money.
Exceptional customer service will ensure clients return and purchase from you regardless of the fact that circumstances are difficult. Of all the business subsidence survival methodologies that exist; concentrating on the client is the best procedure that can promise long haul strength for any business. On the off chance that you neglect to deal with your clients and meet them at the purpose of their needs, then every other recession survival procedure you actualise will be invalid and void.
While economic downturns are admittedly difficult, and increase the obstacles small businesses face in trying to survive and grow, it is not axiomatic that companies have to slash earnings and compress market share. That recourse befalls firms that take too long to realize what must be done, or which resist change. Resourceful entrepreneurs capture the available opportunities, and take steps during today's hard times to lay the groundwork for tomorrow's prosperity.
Compiled by Lilian Katiso