Ten top tips for keeping a small business afloat during a recession

1.      Always conduct a credit check against prospective customers
Set your customer realistic credit limits and aim to trade with companies that you know are creditworthy and have a good track record of paying their bills.

2.      Set out your terms and conditions – and stick to them
Whether your business terms are seven days or 30 days, make sure your customers and clients are clear about this from the start.  Include your terms with order confirmations and invoices.

3.      Always check your invoices
Avoid invoices being returned or delayed by addressing them to the proper department and a named individual if possible.  Include details of the job, a purchase order number, the correct amount, your business terms and a date.   Issue invoices immediately on completion of the job and follow them up with a phone call.

4.      Don’t be afraid to adopt a follow-up system for credit control
Call your customers if their payments are late and issue statements and reminder invoices.  Be alert to possible problems if customers begin to act differently or become difficult to get hold of.

5.      Manage your suppliers
You could get a better deal if you shop around and negotiate longer credit terms and volume discounts with your suppliers.   This could give you more breathing space and spare cash to reinvest in your business.

6.      Keep your records in order
Keep a record of all payments, bank statements and bills.   Bookkeeping may be mundane, but it is essential to keep track of the cash that is coming in and out of the business.   You may find it easier to computerise your accounts; there are a variety of software packages available to help you do this.  Alternatively, employ a professional accountant or bookkeeper.

7.      Shop around for your banking needs
Research has shown that the main high street banks do not always offer the best rates and services for smaller businesses.  There is so much competition between banks at the moment that you can afford to take your business elsewhere.   Work out your specific needs and compare different charges that apply to your company.

8.      Don’t hold too much stock
Holding more stock than you need costs your business money so plan ahead carefully, and be aware of your customers’ buying patterns.   It may be possible to arrange more frequent deliveries from your suppliers so that stock levels can be kept to a minimum.

9.      Think about alternative ways of increasing cashflow
Banks and loan companies are not the only ones who can offer financial assistance.  An alternative might be equity finance, which involves giving up shares in the company.  For some sectors and businesses, grants or special rates may be available.   Another option may be sale and leaseback of assets.

10.  Communicate
Remember to keep everyone, including your bank, suppliers and customers up to date.  Tackle cashflow issues early on so they don’t develop into business problems later.

Regards
MZA