Tips and Advice

We aim to provide a regular series of articles with advice and tips on a range of issues. This month we focus on the Credit Crunch

Crunch Time?

Currently as the economy is entering some challenging times. Businesses and individuals needs to be vigilant and as such I have the following suggestions that may assist you.

Cashflow
Maintain cash reserves as this will be hard to replenish. Hence cut back on capital spending and any unnecessary spending and overhead which has no instant returns in the short term.

Bank lending is almost at a standstill so do not rely on this in the short term as a decision making tool. Build up your own reserves.

Commitments
Do not enter into any lengthy lease commitments but look to even negotiate better terms with current landlords and suppliers. Currently there is a window to negotiate better terms as the market is very nervous.

Do not outlay vast sums of monies as deposits with small suppliers. All suppliers are vulnerable at this time so negotiate better terms and don’t put your business at risk. Try to deal with established suppliers.

With respect to new clients, be careful and vet them thoroughly including carrying out a credit check. They may have come to you for the wrong reasons.

Re-visit your P & L account costs and look for areas that you can cut back on or reduce exposure to.

Avoid any unnecessary risk at this time. Do not enter into long term contracts without undue care and attention as to the short term rewards. Review current contracts and try to re negotiate these in your favour if at all possible. It may be an opportunity at this time. However be careful not to re negotiate debts with your creditors as this is construed as a voluntary arrangement and will harm your credit rating.

Be vigilant. There are many scams going around where individuals are trying to obtain cash via devious means. We have just had one with T-Mobile, where an individual used our company details to obtain a mobile phone fraudulently. Check all invoices that come through and question any that are not obvious. Like wise double check credit card statements and bank direct debits to ensure you recognise all entries.

Take time on the above and take care. Some points may seem obvious but they do need reiterating.

Clients
Always ensure that your terms of business are in order and in writing with new clients, do not assume anything and agree all terms beforehand.

It really is worth having a strong credit control function. No good having the business but no cash to show for it. Chase down those outstanding debts by sending regular statements and diarise these as well. Use the phone to collect old debts it does make a huge difference and ensures a commitment from your clients.

Invoice on a regular basis so you get paid on time. Firms are going under on a daily basis, your client may be next.

Quality
Above all ensure that you spend enough time giving your clients good value and quality. In these times this is of paramount importance.

Structure
Protect what you have. This may mean reviewing current corporate structures if needs be in a more practical format. Do spend more time on your own affairs as well and do not lose focus on this area as it is number One. Re visit your own expenditure, mortgages etc to ensure you are getting the best deal.

Accounts and cashflow
Have information at your finger tips, particularly as regards cash flow. Continue to have a weekly or monthly cash flow forecast updated regularly so you know what lies ahead. This to my mind is more of a priority than a profit and loss, albeit the cash flow will reflect profit. Plan plan plan! You must plan ahead for any eventuality if things get turbulent. If you have cash in the bank then you will not need to take drastic measures. Keep a good dialogue with your bankers.

Pooling
If you have colleagues in the same industry as you then try to get better terms on insurances etc by pooling together and applying for a better deal. Try to even work together and share some cost centres if all possible.

Be Green
Avoid printing documents if you can and email instead. Ensure you have good anti virus and back up systems and try to go more paperless, no point in paying rent for premises just to house large bulky filing cabinets. Email marketing is also an effective tool as you are right in front of your prospect so this is better, cheaper and efficient.

Human Resources
Sadly some will try to take advantage of the current situation so ensure your staff contracts and HR are in order. You can’t afford any disputes or incorrect procedures so ensure that you take advice before hand if you have a delicate situation.

We have a qualified specialist in this area so let me know if you need any assistance here.

Taxation
Be aware of the tax payment dates for yourself and company so you can plan ahead. Take more tax effective remuneration at this time.

Think positive
Having said and done the above, think positive. Do not let the current climate remain foremost in your thoughts.

Everyone has different circumstances and so by this I mean move on and continue to do well. You are what you think, so don’t think negative, just be vigilant and careful but continue to advance your businesses, whilst you may see some casualties around you. For some there will be greater opportunity.

Do not attract tough times by thinking about it all the time. If anything continue to revise your forecasts upwards and you will see that you will do better and even achieve those targets as you keep these foremost in your thoughts. After all many people have made their fortune during a recession.

I wish you all the best and do not hesitate to call or email if you should need any further advice on such matters.

Arif Virani
Chairman