Urgent Cash Flow Action
The economy is in turmoil. Even the banks are panicking.
What can the small business do?
Economic forecasts are useless at present. We are in uncharted
territory so forecasts justified by historic data are no longer valid.
Projections are a matter of guesswork and the experts disagree.
Right now many industries are suffering a severe drop in sales. Those
reliant on debt - particularly short term overdrafts - are most at risk.
A sound company can still be affected by bankruptcies among customers
and suppliers. So what do you do now?
The first need is to protect your cash flow. If you are
confident of being in a better cash position at the end of month than
you are now, then you can plan for the 90 days after that. If your
90 day horizon still looks good, your planning can extend further.
Just make sure that every investment you make now will generate the cash
to cover it within the period you can foresee.
On the other hand if cash flow is negative this month, then take
action now. Survival has to take precedence over all your long
term plans however painful the immediate cuts.
Companies reliant on the Christmas trade will probably already have
significant investment in stock so need to concentrate on any promotion
that will have immediate effect. Online companies have the
great advantage of being able to tweak their advertising and measure
immediate results. Many B2B companies, however, often experience a
dip in trade over this season so can afford a temporary cut in promotion
while waiting to see more clearly their market future.
I greatly regret giving you this message particularly at Christmas
time. I am only too aware that one company's cut is another's lost
sale and in total we can aggravate the final depression. However
you cannot expect the government to bail you out, so you are left to
ensure your own survival.
The good news is that at the end of this period the fittest will be
better established and more capable of enjoying the new opportunities.
Some of these new opportunities are likely to involve the reduction in
outsourcing overseas. The pound may now be seriously devalued, but
the opportunity to run a tightly-controlled, competitive business from
the UK has never been greater.
Relax, then prepare for a profitable 2009!
Regards
Stephen Orr
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