Posted 04/11/2020 In Advice, Blog 2020-11-042020-11-04https://www.wrightvigar.co.uk/wp-content/uploads/2017/01/wright-vigar-logo.pngWright Vigarhttps://www.wrightvigar.co.uk/wp-content/uploads/2017/01/wright-vigar-logo.png200px200px 0 0 When there is an economic downturn, a lot of businesses will fail because of a lack of cash and poor cash-flow planning. However, if a business has good cash flow management in place and is a well-structured business, this can place them in a strong position to see this time of uncertainty out. Good cash flow-planning can be the difference between a company that is stable and a company that struggles, and here are some of our suggestions for cash-flow planning during a recession. Monitor your Cashflow Firstly, you should ensure that you are monitoring your bank account daily. This will allow you to plan for potential payment delays. If payment delays occur, you will have a thorough understanding of how this will affect your cash flow and the consequences. Collect payments Understandably, some customers may not be in a position to pay you immediately however you need to have a clear collection procedure to ensure these delays do not spiral out of control. You ought to consider sending payment reminders prior to the collection date, so that your customer has plenty of advanced warning. As soon as the payment is late you should begin chasing. Collect payments earlier Where possible, encourage your customers to pay you earlier. Many people will not do this willingly, but they may be more inclined to do so if they will receive an early payment discount at a certain percentage. Take longer to pay your bills The longer you wait to pay your bills, the longer you will have money in your account which can help your cash flow position significantly. Ensure you pay within your allotted time though to avoid any late fees. Do check to see if any of your suppliers are offering any discounts for paying early. If the discount they are offering is good, then you may want to pay these bills immediately. This is a balancing act so that you protect your cash flow but remain on good business terms with your suppliers and vendors. Complete credit checks During uncertain economic times, you must know who you are doing business with before accepting new work. It may be best to carry out credit checks before confirming any work. It is a relatively easy and inexpensive process to carry out but gives you peace of mind that the clients you are working with will be able to pay you. Analyse Internal Costs Streamlining internal costs is also important during a recession. You may be surprised to see how much you are spending on outgoings that may be unnecessary. Before you cancel anything or make any changes, ensure you weigh up its value for money. You don’t want to get rid of something you later realise was necessary just because you were in a rush to cut costs. Also, try and negotiate rates rather than cancelling things. Get hold of your utility companies for example and see if they can offer you any deals. Even small discounts can soon add up and make a large impact. Amend your warranties, guarantees or return policies Although there is a certain level of risk involved, you may want to look into offering an increased returns policy or a longer warranty. Although this may feel like it is just costing you more money, it can help close sales with your customers. During a recession most are worried about the effect it will have on them. Having longer to return an item, or an extended warranty can reassure them to buy the product. This is potentially a great option for those businesses that sell higher valued items that involve more consideration before purchasing. Be innovative If you have new products or services in the pipeline, now may actually be the best time to launch. Most companies are risk-averse and may want to keep their innovations on the back burner for more stable financial times. However, it can be the companies that take this risk and provide their customers with improved products and services that survive a recession in a strong position. It is often during economic downturns and difficult times that the most innovative companies are forged and thrive. Find new customers Seek to proactively acquire new customers. You could experiment by creating introductory offers. During a recession, people are extremely price driven and although you need to be careful, providing a discount can lead to an increase in customers. This can lead to additional revenue further down the line once you have converted them into a loyal, returning customer. Apply for a business loan During recessions and economic crises, it can be difficult to apply for business loans or other lines of credit. However, it is not impossible and is worth trying. Many businesses have currently applied for a Bounce Back loan. If you have a budget and forecast then you are in a great position to plan for different eventualities. However, if you currently have no cash-flow planning, that’s okay. Now is a perfect time to create one and utilise it. Once you have one, you can clearly see how a change in sales will impact your cash-flow. You can then make changes accordingly. The above suggestions can help place you in the best possible position to approach a recession or economic downturn. Of course, these times bring a lot of uncertainty. Yet, planning for all eventualities gives you an element of control that helps you mitigate risks in the long-run. When you incorporate cash-flow planning into your day to day operations, you can plan further in advance which is key to surviving a recession. Want to know more about cash flow planning during a recession? Then Wright Vigar are here to help. Give us a call on 0845 880 5678 or email us on website@wrightvigar.co.uk Recent PostsOlympic-Inspired Journey: A Fundraising Success for Local HospicesHMRC’s Latest Crypto Nudge Letters are not to be ignored: What You Need to KnowSuccession Planning for Family Businesses: Securing the Future