We constantly hear about struggling companies in the press, however rather than speculate on the reasons leading to failures I will address some of the steps to ensure that business procedures are in place to give businesses the best chance of survival. These are steps that every business owner can take to be ready to face tough times.
There are often signs of distress both financial and operational such as a decrease in sales, increased costs, a decline in profitability and an inability to pay creditors on time. Financial ill-health is often a symptom, not a cause of business failure. It is key to think and act quickly; identify the problem and find solutions. Think about whether you feel equipped to take business critical decisions quickly and if not, why not. Ensure that management have the skills to manage a downturn. Being equipped to act quickly means using on-line accounting software, tailored to give you access to accurate and reliable data, whenever you need it.
Business owners should seek professional advice from business recovery professionals as soon as they perceive changes which have more than a temporary impact on the business. Often, they have buried their head in the sand for too long and this can impact the ability to find viable solutions. Early intervention will always lead to a better managed outcome.
Businesses need to constantly adapt to changing times. Keep thinking and adapting to changing trends and continually assess commercial risks and take steps to mitigate them: this will make your business more sustainable. Failure to evolve your business will leave you left behind, however if you adapt you can not only survive, but thrive. Ask yourself how your recurring business is generated and really understand your market and find out what the competitor’s activities are. Market knowledge is critical to your business and drives your competitiveness and should be used to inform your strategic plan.
Cashflow is one of the biggest risks for a business. A focus on working capital is therefore an essential skill for business owners. The latest banking apps are designed to deliver accurate real time balance information to you, improving efficiency of business management. The business also needs to keep a close eye on forecasting and run ‘what-if’ scenarios to assess the impact on working capital before key business decisions are made. SME’s sometimes overlook the importance of the accounting function in producing accurate real time business information for management to access. This enables them to accurately measure the effects of any changes in direction and be proactive in providing solutions.
Consider having some cash to fall back on. Alternative finance can provide flexible access to funds to support growing or early stage businesses and can be used to fund capital expenditure or balance the books in the event of cash flow difficulties.
Last, and not least, look after number one – as a business owner do you have the right work-life balance? Achieving this is increasingly important for all business owners and could make the difference between success and failure.