Help your business survive the credit crunch
The credit crunch is receiving so much coverage at the moment that it's difficult not to worry about what it might mean for your business. Business Link offers some top tips for making sure your business continues to thrive
1. Carry out a business health check to review your current activities
This should consider factors such as your customer satisfaction levels, suppliers and their performance, products and services in comparison to other offerings, people and skills base and processes, procedures and equipment.
2. Look after your cash
- Get paid on time: You've supplied the goods or services but not been paid. It's your money and it should be in your bank account.
- Pay on time: You will also reduce your risks by paying your suppliers on time, helping ensure your whole supply chain stays in the black.
- Reduce your stock levels: Money unnecessarily tied up in stock is money that's not in your bank.
3. Get to understand your finances
- What is your break-even point (profit margin)? How much of a cushion do you have? If sales/contracts don't make you much profit, even a small increase in costs or a tiny drop in turnover could push your business into the red.
- Monitor cash in and out of your business on a daily or weekly basis. Don't delay your VAT returns and annual accounts. Make good use of your book-keeping or accounting software to generate reports that tell you how the business is performing now. Alternatively, start your own spreadsheet, using a pen and paper if that suits you best!
4. Know your gross margins
You should avoid chasing sales with a low profit margin, if the same effort will secure sales with higher profits. So, calculate the profit for every one of your products and focus your efforts wisely.
5. Be realistic about what you can and can't change
Prepare an honest forecast of sales, profit and cash flow, and be brutal with yourself about what needs to change. Do this regularly, so you always know what's going on, and can respond quickly to possible problems.
Seek Advice
You don't need to go it alone. Business Link service offers free, impartial guidance and advice. Businesslink.gov.uk includes some great tools to help you carry out your health check and consider other important issues related to the credit crunch. You can also contact your local Business Link on 0845 600 9 006.
Advisers are available to help you review the performance of your business and identify any weak spots that require work in order to achieve goals and manage cash flow. They can also make you aware of specialist business support services available to meet your particular needs.
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