Vantis Plc
A whole new vocabulary seems to be emerging to express the economic crisis that much of the media is predicting: terms such as "sub-prime lending" and "credit crunch" were hardly common currency a year ago, yet we hear little else in the press nowadays.
But the effect of these, plus consumers failing to buy at the same levels as in previous years, falling house prices, and rising inflation, are having a real effect and forcing everyone to consider their next actions carefully.
Against a backdrop of rapidly falling levels of confidence, consumers are revising down their aspirations, and ultimately their expenditure, both over the long and short term. And without sales, the market shrinks. And in a shrinking market, lenders are less inclined to make loans; if they do, they will undoubtedly charge more to make up the shortfall in income because they are lending less. The whole thing turns into a vicious circle, if not a self fulfilling prophecy.
So, just when a much-needed injection of credit into the economy is required, the opposite happens, provoking the question: what happens next, and what should businesses be doing to ensure that they survive any downturn?
Top Ten Tips
Andrew Scott's tips to surviving the credit crunch:
- First and foremost don't panic!
- Carefully and diligently review your business plan. If you haven't got one, create one now, and stick to it unless you have very good justification not to.
- Set short term objectives for, say, three-monthly intervals and keep them under review.
- Review all expenditure and whether it is really necessary. Can any costs be cut or deferred?
- Are there any costs that could be deemed an "investment" and if so, consider increasing the expenditure, i.e. some marketing expenditure may need to be increased rather than cut.
- Review and improve business processes and put new processes in place where necessary. This will improve efficiencies and will drive down costs. If it doesn't, the process is faulty and needs to be reviewed.
- Calculate any extra working capital requirement and work and negotiate with your bank, and perhaps your key creditors, before it is needed.
- Review the whole process of how you deal with your customers. How can you accelerate payments from them? You may want to consider discounts, but beware of granting a reduction to anyone who doesn't actually ask for one.
- Consider introducing non-cash rewards for your team. Perhaps there is an opportunity for senior employees to be offered share options, or would tailored incentives such as holidays or meals out be more of a motivator?
- Check with a business adviser as to whether you are extracting your own "remuneration" from your business as tax efficiently as possible.
Reproduced with kind permission of:
Andrew Scott
Vantis Plc
St Albans - 01727 838255
Web Site Address: www.vantisplc.com
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