Manage Your Business In Tough Economic Conditions : What Strategies Could Be Implemented?
April 1st, 2020 / Haroon Juma /Uncategorised
Companies around the world are trying to come to terms with the impact the coronavirus (COVID-19) has had on their business. This unforeseen event has caused millions of dollars of losses to businesses worldwide.
Nevertheless any company should be making decisions and taking actions with recovery in mind to capitalise when demand increases. Best run companies build in resilience and agility to reshape their business strategy to thrive now and in the future.
A few important strategies to keep in mind:
Protect Cash Flow : Increase Inflow & Decrease Cash Outflow
Continuous flow of cash is the lifeblood of your business. It is important to keep in mind that during tough times cash inflow is the main game. You need to keep that running and decrease the amount of cash flow out of your business as you are not sure for long the economic conditions would stay same. Focus on collecting outstanding debts and payments. Always maintain a minimum cash reserve ratio from your returns for tougher times.
Review Inventory Management Practices
Focus on reducing inventory costs as many businesses are stocking far more inventory than they need. Keep a track of what and when is a particular item being used. Don’t over order as it may be costly. Avoid tying your cash in inventory, rather keep it in liquid assets.
Cut Costs: eliminate nonessential expenses as much as
Try monitoring your costs and priortize where & when to spend your money. Omit discretionary expenditure and opt for essential items/ activities or plans. Reduce your monthly expenditure and look for cost-friendly solutions to run your business efficiently. Pay carefully, by choosing which bills to pay. Pay employees first, and then pay crucial suppliers next. Regularly review when you expect to receive money and pay it out.
Lease rather than buy
It is important to make decisions wisely when there is limited cash in hand. Compare leasing and financing options. You may also be able to save on maintenance costs if you lease rather than buy equipment. Take long-term lease policies so that it easier to pay and less burden on mind.
Ask for deposits and then order goods required. You can put the money to good use while you fulfil the order. Don’t send out invoices at the end of the month. Aim to send them as soon as the job is complete and ensure that it will be purely cash based transactions and avoid credit use.
Make the Most of Current Customers and Clients
We all know how difficult it is to spend wisely in the times of economic recession/ crises. Therefore, it is advised to keep your current customers and clients within your close contact and priority. There is an opportunity to make more sales without incurring the costs of finding a new customer.
The best scenario is having loyal customers, that you many more sales opportunities. If you want to recession-proof your business, you can’t afford to ignore the potential profits of shifting your sales focus to include established customers.
Don’t Cut Back on Marketing
It has been observed how companies immediately stop investing In marketing in the times of economic crises. They fail to understand the importance of aggressive marketing strategy, and hence cut down budges from marketing. This is the BIGGEST MISTAKE.
You should smartly market your business and create different promotional messages In such times. Digitise your marketing efforts to get more effective results. You clear and continuous interaction with the customers is of key importance.
Suppliers : Consider alternative supply chain options
Your suppliers are an important part of your stakeholders. Make sure you are transparent to them regarding your company financial situation and look around for more suppliers in case of shortage or breach of contract between your business and the main suppliers.
Keep Personal Credit in Good
At this point your overall credit rating is very important. With good credit worthiness, you’ll stand a much better chance of being able to borrow the money needed to keep your business afloat if you need to. Consolidate your loans. Review the rate and terms of each loan and then, if you can, consolidate them into a lower-interest account.
There are a lot of different strategies to help you recover from an economic crises situation but absolutely nothing that is hundred percent crises proof. It is therefore, important for you to implement best practices to ensure your business survives tough times and might even be able to profit from them.
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Manage your business in tough economic conditions: What strategies could be implemented?
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