How to cut back during a downturn
Keeping your business going during a downturn can be a huge
challenge, and often, problems aren't your fault - you could run
into trouble because a customer can't pay, or a supplier has gone
out of business. This guide will help you decide which costs you
can cut down on during a downturn.
- Late payment
- Being realistic
That old cliché that 'cash is king' is never truer than during a
downturn - keeping your cashflow up is essential. This is the time
to put plans to buy that new product on the back burner - unless
you can be sure they'll fly off the shelves, don't buy it. Cut down
on the size of your orders as well. You can't risk having a product
which doesn't sell out.
- Remember: cash is king
- Put plans to launch a new product line on the back burner
- Only buy just enough stock; don't be tempted by low prices on
In a survey of failed businesses, almost one in 10 went out of
business because of bad debts, and another 20% failed because of a
lack of working capital. Even at the best of times, late payments
can devastate small business' finances, so be extra-vigilant by
ensuring you run a credit check on all new customers and chase up
payments as soon as they are late.
- Almost one in 10 insolvent businesses failed because of bad
- Run a credit check on all new customers
- Chase up payments as soon as they become late
When you're looking at ways to cut costs, be realistic. Your
customers won't appreciate it if you hike up the prices by 50%, but
similarly, if your rent has been raised or fuel prices are
affecting your prices, you need to strike a balance between the
two. Make sure you stay on top of your cashflow, have a good coping
strategy, and chase up late payments.
- Strike a balance between raising prices and cutting costs
- Stay on top of cashflow
- Have a good coping strategy
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