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.

• Cashflow
• Late payment
• Being realistic

Cashflow

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 larger consignments

Late payment

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 debts
• Run a credit check on all new customers
• Chase up payments as soon as they become late

Being realistic

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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