isola
business
Surviving the Credit Crunch By Ramon Vasquez Vasquez Consulting Ltd, Accountants & Business Consultants
Well managed businesses can “stick it out” through the bad years and can have the opportunity of increasing their market share and being well positioned when conditions improve. Here are a few guidelines on how you can benefit from good organisation. The “credit crunch” or “financial crisis” is upon us, how is it going to affect Small Businesses? Firstly, for most business sectors, this will mean a harder slog maintaining sales and greater competition within your business segment. Badly managed businesses with poor profit margins and poor cash management are most at risk to fail under these conditions. However, well managed businesses which can “stick it out” through the bad years have the opportunity of increasing their market share and being well positioned when conditions improve. The following are a few guidelines that should help: Reduce debtors & Improve Cash Management - A great deal of successful businesses look at their cash position first and then their overall profit. Managing and reducing your debtors will also reduce the need to obtain expensive overdrafts & loans thus saving you bank fees. Set time aside to chase debts – small businesses don’t tend to spend enough time doing this. Invoice promptly and accurately, offer as many ways of getting paid as you can, send statements regularly to customers and chase late payers actively. Be disciplined in managing your debtors. Review Costs & Overheads Regularly – Set a specific review to go over your business’s regular costs. Looking at your regular costs will give you visibility of where you are spend-
14
14-15.indd 14
ing and where resources can best be utilised. Cost management is not about cutting costs in any possible way but about spending money effectively to improve your profit. Manage Stock Levels – For businesses with stock ensure you are working with a practical minimum amount of stock. In times where cash flow is difficult you don’t want to tie up working capital in large levels of stock. Know your numbers - This means that you have up-to-date records of your revenues and expenses. Depending on the size of your business a good tool for this can range from a simple spreadsheet to various available accounting computer programmes. The important thing is to make sure your records are updated regularly. Financial information which is 6 months or a year old is pretty much useless as a basis for making decisions. The main message here is to make sure that your business is efficient. This means spending
Financial information which is 6 months or a year old is pretty much useless as a basis for making decisions
money wisely in order to maintain, or improve, sales and that you are not wasting money on unnecessary costs. In other words “make every Pound count”! The other main area to look out for is cash flow, you must know exactly what your position is as this will allow you to forecast any possible shortfalls in your cash position and take action early. Knowing and checking your financial numbers is critical to the success of your business, especially in difficult market conditions. The Isolas Small Business Unit (‘ISBU’) has launched the Small Business Clinic this year in association with Vasquez Consulting, Accountants & Business Consultants (www.vasquezconsulting.com / + 350 200 78514). The ISBU Small Business Clinic gives entrepreneurs setting up or currently running a business the opportunity to consult with a member of the team and a business consultant/accountant, together in one room and in one meeting, helping them to review their current situation and identify areas of concern which need attention. If you require any further information, please contact the ISOLAS Small Business Unit at ISBU@isolas.gi or by phone on +350 200 78363 to arrange to come and see us, the ISBU Small Business Cinic or for any other advice you may require. The appointment is free and on a noobligatory basis. Give us a call, pick up some tips for free and then decide if you want us to help you succeed or whether you’re happy going at it alone.
GIBRALTAR MAGAZINE • NOVEMBER 2008
21/10/08 18:21:36