By Jeremy Priestley, Managing Partner at The P&A Partnership
October 2008
There’s an old joke, but maybe not so funny at this time, of the bank customer who asked his bank manager, ‘what’s the difference between a recession and a depression?’ To which the bank manager replied, ‘in a recession you lose your job, in a depression I lose mine!’ Well the past few months has seen some considerable damage to our financial markets and the outlook for business in 2009 looks bleak.
With UK and International Banks going down like flies and the remaining ones merging and tightening their lending criteria, it will make life very difficult for businesses to manage these financial storms, particularly if scant attention is paid to the financial information of the business. Now that might sound a bit harsh given the support available from the accountancy profession and from government agencies; but we see large numbers of failing businesses where advice given has not been implemented or where there have been no financial controls and information to base any judgement on.
So here are some thoughts and a checklist of important matters that every business should be dealing with, on a day to day basis, in these troubled times. The list is not finite, and if you need help in getting the information see your accountant today.
• Accurate cash flow projections will tell you about problems before they happen, so prepare them with care on a weekly and monthly basis.
• Make sure your customers know your credit terms before you provide the product or service. Importantly don’t give your customer an excuse to return the invoice and delay payment because they are incorrect in detail.
• More sales on credit does not equal more cash – when sales increase so does your receivables and your stock has to be replaced; if you have to pay for goods before your debtors pay you, you will have a problem if cash is tight.
• Know your customers and get credit checks on them if you have concerns – the more information, the easier the collection processes can be.
• If cash flow is tight and seems to be temporary, consider using a professional debt collector, such as P&A Receivables Services which can be cheaper than using an invoice finance provider, and which is more appropriate for a longer term cash flow solutions.
• Cash can be raised by selling your assets and leasing them back – machinery equipment and the like – but it puts a cost on the business.
• Above all be aware of your problems before they happen, Banks don’t like last minute panic help for finance, always keep them in the picture and reassure them with some robust financial information if you need help.
So if want some assistance with debt collections speak to Scott Cooper on 0114 278 8868. For refinancing or cash flow finance speak to Steve Dunwell on 0114 278 8868.
If your business is in trouble speak to me on 0114 275 5033 today.
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