You may be in Mail Order, Direct Mail or you may be a local merchant with 150 employees; whichever, however or whatever you’ve got to know how is to keep your business alive during economic recessions. Anytime
cash flow in a business, large or small, starts to tighten up, money management of that business has to be run as a “tight ship.”Some of things you can and should do include protecting yourself from expenditures made on sudden impulse. We’ve all bought merchandise or services we didn’t really need simply because we were in mood, or perhaps in response to flamboyancy of advertising or persuasiveness of salesperson.
Then we sort of “wake up” a couple of days later and find that we’ve committed hundreds of pounds of business funds for an item or service that’s not essential to success of our own business, when really pressing items had been waiting for those money.
If you are incorporated, you can eliminate these “impulse purchases chases” by including in your by-laws a clause that states: “All purchasing decisions over (a certain amount) are contingent upon approval by board of directors.” This will force you to consider any “impulse purchases” of considerable cost, and may even be a reminder in case of smaller purchases.
If your business is a partnership, you can state, when faced with a buying decision, that all purchases are contingent upon approval of a third party. In reality, third party can be your partner, one of your department heads, or even one of your suppliers.
If your business is a sole proprietorship, you don’t have much to worry about really because as an individual you have three days to think about your purchase and then to nullify that purchase if you think you don’t really need it or can’t afford it.
While you may think you cannot afford it, be sure that you don’t “short-change” your self on professional services. This would apply especially during a time of emergency. Anytime you commit yourself and move ahead without completely investigating all angles, and preparing yourself for all contingencies that may arise, you’re skating on thin ice. Regardless of costs involved, it always pays off in long run to seek out advice of experienced professionals before embarking on a plan that could ruin you.
As an example, an experienced business consultant can fill you in on 1244 stock advantages. Getting eligibility for 1244 stock category is a very simple process, but one with tremendous benefits to your business.
The 1244 status encourages investors to put equity capital into your business because in event of a loss, amounts up to entire sum of investment can be written off in current year. Without “1244” classification, any losses would have to be spread over several years, and this, of course, would greatly lessen attractiveness of your company’s stock. Any business owner who has not filed 1244 corporation has in effect cut himself off from 90 percent of his prospective investors.
Particularly when sales are down, you must be “hard-nosed” with people trying to sell you luxuries for your business. When business is booming, you undoubtedly will allow sales people to show you new models of equipment or a new line of supplies; but when your business is down, skip entertaining frills and concentrate on basics. Great care must be taken however, to maintain courtesy and allow these sellers to consider you a friend and call back at another time.
Your company’s books should reflect your way of thinking, and whoever maintains them should generate information according to your policies. Thus, you should hire an outside accountant or accounting firm to figure your return on your investment, as well as turnover on your accounts receivable and inventory. Such an audit or survey should focus in depth on any or every item within your financial statement that merits special attention. In this way, you’ll probably uncover any potential financial problems before they become readily apparent, and certainly before they could get out of hand.
Many small companies set up advisory boards of outside professional people. These are sometimes known as Power Circles and once in place, business always benefits, especially in times of short operating capital. Such an advisory board or power circle should include an attorney, a certified public accountant, civic club leaders, owners or managers of businesses similar to yours, and retired executives. Setting up such an advisory board of directors is really quite easy, because most people you ask will be honoured to serve.
