Business occasionally tapers off, but with right strategy you can keep your company healthy during economic slumps. The following discussion explains how you can anticipate downturns and what you can do to keep the work coming.
By Mike Ukena
If your company is big enough to have a person whose main responsibility is to tend to accounts receivable, now is the time to make sure you are getting a copy of the numbers every day. A monthly update is no longer good enough. Even if all you do is look at the totals, you will be much more in tune to what is going on and which way things are headed.
If your company is smaller and you take care of the aging (a periodic report that shows outstanding receivable balances, organized by customer and month due) yourself, it is now a daily task. Accounts receivable can get upside down very quickly. And if your customers consider you a minor vendor, payments will come to you much later, when their cash is short, than to their more important suppliers. Think about how you would react in the same situation. When your cash is tight, who do you push aside and whom do you make sure gets paid first? The usual rule of thumb is wages first, primary materials vendors second, utilities and phone third, minor vendors last.
I would be willing to bet that very few screen-printing or digital-imaging companies qualify as primary vendors to their customers. It is important to keep that in mind--even in the good times.
If you have money in the checking account after paying all the bills, then your cash flow is good—today. Do you know what it will be like tomorrow, or next week? Order volume, accounts payable, and accounts receivable all impact your cash flow. Keeping the number positive is one of the major challenges of any business. Cash flow usually suffers right away in any economic downturn. If you think about the seasonal changes in your business and the impact that these fluctuations have on your cash flow, then you will begin to understand what I am talking about. Most downturns are like seasonal changes on steroids.
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