The current economic environment is proving to be a real test for business and this looks to continue into the near future. As is the case in any business cycle, those who survive the tough economic times generally succeed and ultimately thrive when the conditions return to a more predictable status.
Businesses that are well organised, have a clear understanding of their operating environment and drivers of success, and are not excessively leveraged to the extent that it impacts adversely on their bottom line are in a position to benefit enormously within the future economic landscape.
Now is the perfect time for business owners to take a step back and review the market, as well as the internal workings of their business. With support from our business growth specialists, we recommend our clients constantly review the way they run their business. It is all part of the overall process of maximising the success of your business. No one can control the fluctuations in the market, but businesses, along with their staff, can often improve the efficiency of their business by reviewing internal processes and up-skilling key staff.Ensure your financial information is up to date and accurate – monthly, if possible. What are your sales margins and costs? How many of these core measures are you actually aware of and do you really know how you're performing on a monthly basis?
Prepare cash flow projections. In the current environment this exercise has immense value as it provides a snapshot of your future business operations around the key element of cash. The preparation of a sound cash-flow template enables constant updating to be undertaken. This will then provide your business with a lead time to react to negative trends, before it is too late.
Review and reduce debt levels where possible. Many businesses risk going under due to excessive debt carrying costs. Now is a time of consolidation and debt reduction.
Accounts receivable collection is critical to any business success, more so in the current climate. To protect your business, ensure that your terms of trade are current and enforceable.
Review overheads and wage costs to maintain profitability. If your margins are not being achieved due to labour costs, consider the following options: Reduce staff costs, staff structures or remuneration packages.
Communicate with your bank. Banks respond better when they are aware of your circumstances as opposed to a belated call for money when additional funding is critical to the continuation of the business.
Take action now to approach any potential problems in a proactive way. In our experience it is best to know how you are really trading rather than living in the hope that things will improve.
You need to identify and understand the critical issues facing your business and develop a practical approach to maximise your business performance. With accurate and concise financial reports (historic and projected), and a thorough understanding of the actions required to move your business forward to where you want to be, you as a business owner are in a position of strength.
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Mark Peters, who has been a business consultant with WHK since 2009, has over 25 years experience working in and on businesses.
This information is general in nature and readers should seek specialist advice before making financial decisions. WHK Pty Ltd ABN 84 006 466 351
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