A disturbing statistic is that company liquidations are increasing throughout Australia. Many of these have involved small businesses who were not prepared for the business downturn. Another worrying sign is a significant upturn in business for pawnshops, payday lenders and short-term loan companies. Businesses need to be taking action now to ensure survival during the downtown.
We are able to assist our clients with a special “Survival In Difficult Times For SMEs Workbook”, containing 36 checklists, a complete review of all business operations and the development of a summary report containing agreed strategies to ensure the business’ survival during these difficult times. I thought I would share a few of the points, questions or checklist items we consider in a series of posts dedicated to Ensuring Business Survival.
Financial Review
Business survival requires a detailed examination of all aspects of the business’ operations to ensure that the business will continue to perform throughout the economic downturn.
Steps that you could consider in reviewing your business include:
• keep the business’ books up-to-date so that management is able to foresee any cashflow difficulties before they happen;
• prepare monthly financial accounts including calculation of key performance indicators and discuss the accounts and KPIs with managers and team members;
• brainstorm creative ways to increase revenue and reduce costs; make brainstorming part of your daily routine;
• review the accounting and computer systems to ensure that you are able to receive prompt accurate financial and business operational reports.
Cashflow Review
Now is a good time to review management of cashflow in the business:-
• Review debtors’ management – Are outstanding debtors being followed up promptly?
• Review costs – Can any costs be reduced or eliminated?
• Review labour productivity.
• Review waste control.
• Review the investment in stock – Can you have “sales” to clear out slow moving stock?
• Review the investment in work in progress – Can this amount be reduced?
• Can you sell unused assets?
• Can you negotiate with suppliers for improved payment terms and support?
• Can management increase the time working ON the business?
• Can you be proactive in getting the business in order before you receive an “invitation” to a meeting with your banker?
• If you are looking at business acquisitions, try to stick to your core competencies.
• Review risk management strategies for the business.
• Review bank and other financial loans – Can you renegotiate at the lower interest rates that are now emerging?
Survival in Difficult Times
FOLLOW THE WHOLE SERIES
This post is part of the “Survival in Difficult Times for SMEs” series.
Be sure to read the other parts of the series for a clearer picture. You can follow the series along on the blog or read them first by subscribing to our popular Business Plus+ newsletter.
Article by Christie Lewis
Christie is Practice Manager at Alan Lewis Accountants . Besides accounting, her passion is for all things small business (and blogging, of course). You can contact Christie directly at christie@lewistaxation.com.au.
Christie has written 799 awesome articles for us at Alan Lewis Accountants – BLOG
Twitter: @christielewis
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Useful info, nice blog, thanks.
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