In the current economic climate, it is still critically important to manage the basics well. Nothing is more basic than making sure that know your numbers, consider how to improve them if necessary and that you have cash. Cash is always important and in times of uncertainty, its importance increases.
It is particularly critical in a credit shortage and credit is still very difficult to obtain. (Jo Haigh will offer some valuable thoughts about banks and credit on tomorrow’s blog post). Making a profit, of course, remains important but maximising it may not be so important – or possible. Think about how you can boost your turnover, reduce your costs and realise the assets that you have into available cash – without, of course, eating into your ability to perform as a business.
It is important that you do everything you know to preserve cash. Clearing old stock to realise its value and free space is one option. Staying on top of credit control – collecting your debts more quickly – and improving your payment terms are ways to ensure that cash arrives in the business more quickly. Also consider increasing your exports where the exchange rate works in your favour.
One area of potential cost savings may turn out to be a false economy. Making redundancies may need to happen but, if your can do it, hang on to your best people as they will be the basis of your recovery strategy. Show flexibility towards your key people and they will be flexible in return. Coming up with a shared approach to containing costs by reducing hours or salary expectations, with a bonus once the business returns to performing well, may retain good people and save them from the unemployment statistics.
You need to know the status of your business every day, every week, every month. In the past, Academy Group 2 has run additional full day meetings for members, focussed entirely on ensuring that they know their numbers. Every individual who attended (including a bank manager, an accountant in practice and two accountant CEOs) gained massive benefit from the collective wisdom of the members of the group.
Knowing your numbers is only the start, of course. Taking appropriate action to deal with adverse trends before they become damaging to the business or taking advantage of opportunities is also important. Having the cushion of cash in the bank can help with both adversity and opportunity and help you to retain flexibility of action.
Brian Chernett is founder of The Academy for Chief Executives (ACE) – He has 43 years’ experience as managing director of private and public companies, including subsidiaries of Booker Bros McConnell, the Landmark Group, and several other major companies. Find out more at www.chiefexecutive.com.
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