Is your company a leaking bucket, asks Harland Accountants’ Deborah Edwards
We closed our last Business Cornwall article with Darwin’s “only the fittest survive”, which equally applies to the business world as well as the animal kingdom. It is a jungle out there. Banks are unwilling to lend, consumers are less willing to spend. Whilst the recession does seem to be sorting the Business men from the boys, it is an opportunity to take stock, take advice and make some tough decisions.
In the boom-time nineties and into the new millennium, incoming waves of credit finance allowed many businesses to plug the holes with easy money, appearing successful to the outside world as well as using it to undercut competitors.
We’re not saying that debt is always bad. Businesses will always need a helping hand to startup, expand or invest in technology and machinery but these should be carefully assessed arrangements and not simply a case of topping up a leaking bucket.
In today’s world the scars remain in the form of high finance interest, crippling loan repayments and less than water tight business models. Unless businesses can function whilst reducing this debt, or at least living within it, life is going to be tough and if Dave has asked us to slice up our personal credit cards, we should also think about doing the same with our business credit and operating more self sufficiently.
Cornwall more than most regions has benefitted from EU fiscal stimulation but the next few years may well deliver the double whammy of funding cessation and the recalling of bank over-drafts. Going back to Darwin, the species that adapt to their environment will win. Have a look at what’s wrong with your business. Perhaps you are charging too little? Learn to spot time-wasters early on and don’t be afraid to say no. Be tough. Future-proof your business today.
- Is every sale worth it? Turnover is vanity, profit is sanity
- Do you have a business plan? Not for the bank. For You
- Forecast. Be able to identify peaks and troughs and be ready for them
- Make your business debt proof. Don’t let your customers debts become your problem. Have good credit procedures in place
- Remember – Cash is king!
- Reflect. How has your business performed? Ask yourself why. Don’t just rely on the “sign of the times” fall-back.
- Be specific. Your business is individual. Learn what went well and what didn’t and use this knowledge.
If you can be truly objective with your business and make the necessary changes to survive, you will be in a position of strength when the clouds do eventually lift. Of course this is a difficult process and some clear outside vision is often useful from an accountant or business consultant.
Over the following months and years we will be steering our clients in the right direction and supporting them in some difficult decision making. This vital part of the process will eventually strengthen their businesses as well as our economy.
This article first appeared in the November 2011 issue of Business Cornwall magazine