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Beat the credit crunch: survival tips for small businesses from XLN Telecom.
Beat the credit crunch: survival tips for small businesses
As the credit crunch in the UK sees banks tightening the reigns on lending, small businesses are being hit particularly hard. Lacking the kind of cash flow that large companies posess, new or small businesses are generally at the mercy of their lenders, requiring constantly renewed loans to keep business afloat.
Small businesses, who are viewed as risky investments by banks even in boom times, will now find it harder than ever to secure loans. If they do, they will come with increased interest rates.
There are a number of ways in which small businesses can prepare for a financial downtime, with a focus on cashflow being a central issue. Here are some simple steps you can take to help whether the storm:
Make cashflow forecasts
If things are likely to get tough in the near future, it’s important that you prepare for them. One of the most important things you can do when preparing for a credit crunch is to create a realistic forecast of future cashflow. Run some scenarios, such as a drop in revenue or loss of customers, and evaluate how well your business would cope in this situation.
Visit Figurewizard to create a cashflow forecast online.
Review your current bank
Your bank will play a key role in your credit crunch survival, so it’s important to know you’re getting the best deal for your business. Keep an eye on your current bank in the press and be on the lookout for any changes that may affect lending. If you are considering switching accounts to a new bank, thoroughly investigate your options. Compare the various deals, and be sure to pay attention to the fine print – watch for hidden charges and any clauses which may affect your interest rate.
You can compare different account options online by at MoneySupermarket
Look for ways to cut expenses
Trimming the fat from expenses can go a long way in saving company cash. Think carefully about any purchase you make. Do you really need to buy top-of-the-line laptop, or would something cheaper serve the same purpose? Travel expenses, whether its taxis to a meetings or flights to conferences, can quickly add-up. Consider whether there are any viable alternatives. If a meeting could occur via telephone or video-conference instead, this would cut out the money (and time) spent on travel.
Get tough on accounts owing
While you may take a more relaxed approach during boom times, during a recession it is important to ensure clients accounts are paid on time. Larger clients will be adopting their own strategies to retain funds during these times, and so may be paying even later than usual. Don’t be afraid to get tough, a good client will understand that you’ve got a business to run too, and that receiving payments is an essential part of maintaining a steady cashflow.
Try to reduce your monthly costs
No matter how tightly you budget your finance, there will always be unavoidable costs that will occur for every business, such as rent and bills. Though expenses of this nature can not be cut out entirely, you may be able to save on them. Use price comparison sites, even for small items such as stationary, as over time these costs will add up. Phone & broadband bills can be costly, so look for a package which allows you to bundle these services. If your business calls abroad often, make sure your provider offers cheap international calls. Could you move to cheaper premises to reduce rent? Try to avoid signing up to long-term contracts, as you may want to get out of them if times get tough.
Try to keep staff costs down
Paying employees is an unavoidable cost in most businesses, but some careful consideration of how this money is spent can go a long way. If you are thinking of recruiting new staff members, evaluate whether existing staff could fill this gap through paid overtime. If new staff must be employed, ensure this recruitment is effective. Avoid costly recruitment processes, and take time to the right person for the job. Recruiting can be an expensive procedure, so it’s important to get it right the first time.
For more in-depth information on surviving the credit-crunch, visit businesslink
As the credit crunch in the UK sees banks tightening the reigns on lending, small businesses are being hit particularly hard. Lacking the kind of cash flow that large companies posess, new or small businesses are generally at the mercy of their lenders, requiring constantly renewed loans to keep business afloat.
Small businesses, who are viewed as risky investments by banks even in boom times, will now find it harder than ever to secure loans. If they do, they will come with increased interest rates.
There are a number of ways in which small businesses can prepare for a financial downtime, with a focus on cashflow being a central issue. Here are some simple steps you can take to help whether the storm:
Make cashflow forecasts
If things are likely to get tough in the near future, it’s important that you prepare for them. One of the most important things you can do when preparing for a credit crunch is to create a realistic forecast of future cashflow. Run some scenarios, such as a drop in revenue or loss of customers, and evaluate how well your business would cope in this situation.
Visit Figurewizard to create a cashflow forecast online.
Review your current bank
Your bank will play a key role in your credit crunch survival, so it’s important to know you’re getting the best deal for your business. Keep an eye on your current bank in the press and be on the lookout for any changes that may affect lending. If you are considering switching accounts to a new bank, thoroughly investigate your options. Compare the various deals, and be sure to pay attention to the fine print – watch for hidden charges and any clauses which may affect your interest rate.
You can compare different account options online by at MoneySupermarket
Look for ways to cut expenses
Trimming the fat from expenses can go a long way in saving company cash. Think carefully about any purchase you make. Do you really need to buy top-of-the-line laptop, or would something cheaper serve the same purpose? Travel expenses, whether its taxis to a meetings or flights to conferences, can quickly add-up. Consider whether there are any viable alternatives. If a meeting could occur via telephone or video-conference instead, this would cut out the money (and time) spent on travel.
Get tough on accounts owing
While you may take a more relaxed approach during boom times, during a recession it is important to ensure clients accounts are paid on time. Larger clients will be adopting their own strategies to retain funds during these times, and so may be paying even later than usual. Don’t be afraid to get tough, a good client will understand that you’ve got a business to run too, and that receiving payments is an essential part of maintaining a steady cashflow.
Try to reduce your monthly costs
No matter how tightly you budget your finance, there will always be unavoidable costs that will occur for every business, such as rent and bills. Though expenses of this nature can not be cut out entirely, you may be able to save on them. Use price comparison sites, even for small items such as stationary, as over time these costs will add up. Phone & broadband bills can be costly, so look for a package which allows you to bundle these services. If your business calls abroad often, make sure your provider offers cheap international calls. Could you move to cheaper premises to reduce rent? Try to avoid signing up to long-term contracts, as you may want to get out of them if times get tough.
Try to keep staff costs down
Paying employees is an unavoidable cost in most businesses, but some careful consideration of how this money is spent can go a long way. If you are thinking of recruiting new staff members, evaluate whether existing staff could fill this gap through paid overtime. If new staff must be employed, ensure this recruitment is effective. Avoid costly recruitment processes, and take time to the right person for the job. Recruiting can be an expensive procedure, so it’s important to get it right the first time.
For more in-depth information on surviving the credit-crunch, visit businesslink
Replies to This Discussion
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Permalink Reply by Hazel J Hill on
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hello, interesting to read the above. One should be doing all these anyhow let alone in these times.. Staff problems, outsource and always justify the cost of taking someone onto the books. Also justify the need for expenses, be creative, innovative. Tip I was told byt buying a poece of soft, I eliminate taking on staff or outsourcing work, making my time more affective and organised.
Well researched business will make a business successful, but this must also be continuous. Now and then take 10 steps back and review everything. Never give up.
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Permalink Reply by Julie J Farrell on -
Thank Amanda
That was a really interesting article. Thanks for sharing it!
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Permalink Reply by Amanda Carlin on -
Thanks Julie, I'm glad you found it of interest. Kind Regards, Amanda.
© 2009 Created by Amanda Carlin
