If your business strays into difficulty, profitability and cash flow will become your biggest concern.
If your company is struggling with either of these or can’t pay its bills, then the first port of call will be to take a long hard look at your costs and overheads.
After that, you’ll have to look at your company’s core functions – how efficient they are and where your spending needs to be reduced.
Here are some ideas of where to start:
1. Cash flow reports
Set up daily cash flow reports to help you take control of what’s coming in and going out of the business. Bit by bit, scrutinising these will help you reduce the gap between outgoings and revenue. Make sure you are the person approving all purchases and sign off all payments.
2. Examine spending
Now is the time for a health check on your outgoings. Can you reduce your fixed monthly costs by eliminating non-essential costs and renegotiating contracts? First, analyse your purchase orders and question whether you are paying over the odds. That means speaking to as many suppliers as possible to review their prices and negotiating lower monthly payments rather than quarterly to give you some breathing space. Negotiate hard!
3. Review expenses
Stop staff charging expenses for items that aren’t powering the business forward. If expenses aren’t necessary, it’s time to reel them in.
4. Stop doing things that don’t contribute
Work with your operations leads to the efficiency of your business. If tasks are being assigned that don’t contribute to the health of the business, stop doing them. This will free up resources that could be directed into improving your financial position.
5. Review your stock
If you have stock that takes up room and incurs extra expense, sell or write it off. Don’t hang on to what you don’t need. Next, study how much stock you need and stick to that level. Be clear on the cost of stock – how much do you really need, and how much does it cost to store? Investigate whether you can get a better price for storage elsewhere.
6. Focus on your systems
Can you deliver a product in a cheaper, more efficient way than you are currently? Can you do it with fewer people or less equipment?
7. Feed the best performing parts of the business
Conduct a top-to-bottom review of your products and refocus on the ones that are delivering the greatest margins. That may mean pausing or ceasing to sell some items or services. It could also mean asking salespeople to prioritise one or two products exclusively.
Give your best leads to your top salespeople and reward them accordingly. It may not seem fair on less experienced staff, but you need to maximise conversions in times of strife.
8. Shorten the sales cycle
Can you get from lead to sale in a shorter period? This might not fit with your long-term vision for how you cultivate customers but shortening the sales cycle of your most popular products will give you a short-term advantage and, if successful, it might change your long-term outlook.
9. Look at retention rates
It’s often more expensive to find new customers than to retain your lapsed or current customers. Could you be better at retaining customers or persuading satisfied customers to buy again?
10. Get advice
It’s hard to take a step back from your business and find the solutions that you need on your own. It might mean even more expense in the short term, but investing in expertise will likely mean greater benefits.
11. Increase prices
This is the last item on the list, but it doesn’t make it the least important. It might be the first action you take. Question carefully whether your products or services are under-priced and renegotiate terms with customers.
All of these methods are likely to equal benefits to your bottom line but identifying the correct decisions and implementing them is not something to take lightly. Speak to the Future Strategy team if you need help.