Even the Chancellor admits that it’s difficult out there; so we’re probably all doomed (Mr Mannering?). In the absence of abject despair, we’ve been urging our clients to take a proactive response to the current problems and here is a very condensed version of what we’ve been suggesting they do:

• Make a trading forecast for the next 6 month, which you can review monthly looking at actual results against the forecast. This needs to be coupled with non-financial forecasts and monitoring ie footfall, sales lead conversion, sales leads, production efficiency. So, for example, if you are falling behind sales forecast, is it because footfall is down. If so, what can be done to pep up the advertising? If the average sale value is falling, what tactics can you employ to get customers to trade up, adding to their purchase?
• Bring statutory accounts up to date in case your bank’s help is needed.
• Create a cash profile for the next 6 months. Factor in possible reductions in debtor days as you squeeze your customers for payment and consider what happens if suppliers reduce your credit terms.
• Ask your bookkeeper to create weekly and monthly forecasts of creditors to be paid and get him to liase with you each week to review actual/forecast cash. Set a fixed time each week to do this. Elevate the importance of the bookkeeper and support him. He will be taking the brunt of the pressure from creditors and will need your support and guidance.
• Schedule out when you expect to receive payment from customers. All payments outside the target need to be reported to you and managed accordingly.
• Make sure salesman understand what success is ie sales + cash.
• Make a pro-active approach to your Bank to establish their willingness to provide additional finance if required. You may not need their help but they’d rather deal with a customer who anticipates problems rather than dealing with a cash crisis at short notice. (Trust us on this )
• Reduce your stock holding where possible. Can the purchasing department streamline their buying to achieve ‘just in time’? Do you need to line up alternative suppliers if your current ones cannot perform well enough?
• Establish what personal lines of credit are available you. If all avenues of traditional finance are closed to the business, then your ability to put in cash can save the day.
• If you have a negative working capital requirement, press for increased sales provided these are profitable. If, conversely, your working capital requirement (as a % of your turnover) is the same or higher than your gross profit %, consider shedding problem customers. These are the ones who are always slow to pay (ie consume working capital) and ask for a discount. We’ve all got them. Encourage them to move to your most potent competitor.
• Credit insurance- consider this even though it may be expensive.
• Credit policy- if you haven’t got one, write one and enforce it. There is plenty of good guidance available. The important point is to have one and enforce it. Generally, bad debts tend to gravitate towards businesses with poor credit policies.

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• Consider a moratorium on capital expenditure.
• Consider effectiveness of your advertising and promotion. Only cut back advertising when it is ineffective or the pay and spray variety. Find someone who can help you to promote your business well and develop an efficient promotional strategy. (Just putting a poorly written advertisement in the local paper does not count as efficient). Money spent on good marketing is an investment not a cost. Most business don’t intend to waste money on marketing: it just ends up that way.
• Ensure your bookkeeper has access to bank account information so he/she can reconcile the cash position every day.
• Sell the Porsche.
• Sell the Wife’s Porsche.

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