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Avoid the Financial Fire Drill
Whether you've been affected by the economic slow down or not, now is the time to develop a "reverse growth strategy."
The goal:
Establish milestones and certain controls so you'll be able to contain the spreading of financial fires that threaten the economic meltdown of today and be able to adjust before your feet are actually on fire.
Example:
Say your gut says that your business's gross revenue will be down 20 percent next year. Your customers trickle down to you about their cash flow problems and become slow paying customers or worse, not paying at all and then you experience losses.
Ensure your line of credit is good |
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Ensure your line of credit is in good shape and possibly even investigate on how you may be able to increase it now before you need it.
Check your personal and business credit status and correct any errors (there always seems to be a mistake).
Check your percentage levels |
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Break down the 20 percent decrease in 5 percent increments and look at the impact on your finances, operations, and cash flow at each percentage level.
Identify the top three things you could/would do to offset or address the situation at every 5 percent level, specifically related to cash flow. |
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Which direction are YOU looking at your finances |
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Establish control points in your accounting review that will alert you to dangerous levels. Keep in mind that you must look at this from multiple directions, not just gross sales but also products and customers. Look for the drips at the bottom of the bucket-they're usually not obvious.
Look at labor costs per customer, not just in direct operating expenses but also the product, and who supplies that product. This will help you quickly identify the customers that are generating minimal to very low profits. Slow pays are a good place to start. Look at the supplier of that product, is there maybe another supplier with better prices. When you factor in the "additional" time/labor to collect an A/R, you may find yourself better off without that customer or supplier.
Make sure your payment terms with your customers are in place and agreed upon. |
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Profit and Loss (P&L) report |
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Increase the frequency of your in-depth assessment of your finances. A key area here is your Profit and Loss (P&L) report(s). This is where the rubber meets the road, so educate yourself on how to read and interpret a P&L.
Watch your nickels and dimes, and the dollars will take care of themselves. A small $30 per month saving may not seem like much, but I assure you that they do add up. You are more likely to find multiple $30 improvements vs. a $100,000 big hit. |
Would you like more information
Contact
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Steven J. Krisfalusy
krisfalusy@sjkberinger.com
Business & Technology Architect and Partner
SJK Beringer Group, Inc.
Your Local Business & IT Experts
SJKBeringer.com
Corp Off: 440-356-3636 Ext 222
Corp. Fax: 440-353-1824
Cell: 440-552-6599
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