What do I do if I’m hit by a downturn?
Several factors can disrupt your cashflow, some within your control and some not. While there is little you can do to stop recessions, tax hikes and tardy customers, you can react in a proactive way in order to safeguard your business.
Many businesses hit a point where they lack the cash to pay their debtors. If this happens, don’t panic. Companies that have gone through similar scenarios have gone on to become success stories.
You can ease the situation by trying to foresee problems rather than just surviving day-to-day. Make sure you take on only the business you can handle and don’t overstretch your company. Keep only the stock and equipment you need now and the immediate future, rather than paying out for things you don’t need.
Maintain a tight control of your borrowing. Establish good lines of communication with suppliers and regular customers so that you can approach them when you’re in need.
Keep an eye on the business press and converse with business networking groups to see if there are any new taxes or costly fresh legislation that will directly impact your business.
Once problems hit, it’s often worthwhile to approach a bank for a short-term loan. However, banks aren’t hugely keen in handing over money straight away, so make sure you accurately forecast your downturn and establish a line of credit with a bank for a few months before you need the cash injection.
Explain your situation to suppliers and attempt to get extended terms. Your suppliers won’t want to see you go out of business as they will lose custom, so this approach can often work.
Talk to your best customers and offer incentives to them for paying early. Pursue your worst customers and, if necessary, drop them if they are proving too big a drag on the business.