Financial Crisis? - Get Out Now

If your business is treading close to the line it may be time to seek help from an accountant or another professional.

Strategies need to be followed that explore ways of recovering the financial health of the business and avoiding liquidation or bankruptcy.

Here are a few strategies that may be considered:

  • Keep your costs low – especially your overheads because they can easily run away. It is easy to allow costs run away when times are good, but then it becomes difficult to cut back when times are hard. You should have a budget to work to and it should be followed closely whether the times are good or bad.

    It is important to bring your costs into check as soon as possible. It is often surprising which expenses can be trimmed back, simply by going through each one and deciding whether it is necessary, or whether it can be reduced or deleted.

  • Make sure that you are diversified – that is, ensure that your business does not depend on one particular customer who may be profitable because of their size, but can put your business at risk should they take their business elsewhere. If you can, see about diversifying into other industries or other types of products or services. The key to safety in any investment is to diversify. The same principle applies in the operation of your business.

  • Don’t move ahead too fast. If you find things are shaking a little bit, look at cutting back your business growth and focusing on the areas which are profitable. This may mean reducing staff or cutting back on production. While it may seem hard, in the long run it may guarantee your survival.

  • Watch your cash. Without cash you will quickly find yourself in trouble. If you are constantly having cash liquidity problems, it needs to be addressed before it becomes irreversible. It is no use having good sales figures if your cash collections, and therefore cash in your bank, need improvement.

  • Look at relocating. Relocating your business to another area may not only cut expenses but it may be a move that allows you to be more efficient. This may come about because you become closer to your customers or more accessible to your clients etc.

  • Focus on sales (increasing income) and costs (reducing expenses). Look at your pricing. Make sure there is sufficient margin in the goods and services you sell. Make sure you react quickly to all areas that obviously require urgent attention. Don’t just leave things. The problems won’t just go away. You will find that once the problem has been tackled a turnaround may result which could surprise you.

Copyright 2005

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