HARD TIMES CAN BEFALL ALMOST ANY BUSINESS. When you’re hit with an unexpected crunch — from a faltering economy, unfavorable industry trends or just tough competition — your first instinct is probably to conserve cash.
That’s a positive instinct, but before you make wholesale cuts in spending or radically alter the way you do business, remember that certain expenses help you maintain and even improve your competitive position. Cutting critical expenses can hurt you worse or even threaten the survival of your business, so exercise caution.
Accounting and Audit Services
In tough times, you must keep on top of your cash. To do this, you need top-notch financial reports, timely tax filings and solid trend information from your accountant or auditor.
Advertising is your lifeline to sales. It keeps customers informed about what you have to offer and helps turn over inventory. Many large corporations, when faced with declining sales or profits, dramatically boost advertising expenses.
Turning your receivables into cash is one of the best ways to weather a cash crunch. However, your customers may be short on cash, too, and they may want you to wait longer than usual. It’s very important to bolster collection efforts when things are tight.
What unique courtesies and services do you provide your customers? What do you have over the competition? Never skimp on relationship building. Decide how you can make your service more personal, and you’ll build a following of loyal customers when you need them most.
Whether manually operated or computerized, good information systems help you monitor the health of your business, the work of your employees, product movement and so on. If your information systems are not computerized, a business downturn might be the perfect time to install a new system: You can often free up some staff time over the short term and, if the downturn persists, good information systems may even let you cut staff costs.
Insurance protects you from catastrophe. You should examine your coverage needs when things are tight, but don’t slash your coverage indiscriminately or you might eliminate the protection that could save your business.
You may be faced with salary or bonus reductions when money is scarce. That’s understandable and perhaps inevitable. But be wary of cutting relatively low-cost benefits that have high symbolic value for your employees. Days off on employees’ birthdays, inexpensive holiday gifts and staff gatherings, for instance, might be extremely important in maintaining morale.
This is not the same as advertising. Advertising concerns itself with paid media messages directed toward your constituency. Marketing more broadly attempts to help you match existing and new customers to your products. It can include market research, public relations, sales promotions and much more. Aggressive marketing might be one good way to attract new customers.
Meetings can be frustrating and unproductive — especially in-house meetings. But when times are tight, you and your employees need to communicate face to face. If they’re planned well, meetings can help maintain an aura of calm, candor and stability. They also can help motivate your employees to meet the special demands you’re facing.
You may have to pare your budget when it comes to purchasing property, equipment and vehicles, but don’t slash it. Attractive surroundings can make all the difference to the customer seeking to do business with a solid firm that looks like a winner. It might be time to spruce up your surroundings with low-cost amenities and decorations.
Never try to improve your cash position by holding up payment of payroll withholding or sales taxes. Not only will you face huge penalties and interest later on, but in some instances, you may even subject yourself to civil or criminal action.
Unfortunately, managerial and employee development is often among the first expenses to be cut. Yet if you carefully select training programs, seminars, college courses, books and tapes that focus on business growth and productivity, you may find these training resources becoming some of your best survival tools.
When times are tough, you should cut expenses. The measure of your business acumen, however, will not be the size of the cuts you make, but the wisdom you employ in making them.
Richard Ensman Jr.’s columns appear in hundreds of trade publications throughout North America. He is based in Rochester, New York.