An economic recession is a phase of the business cycle in which the economy is in decline. This phase basically marks the end of the growth period in the business cycle. Economic Recessions are characterized by declining consumer purchases (especially durable goods) and subsequently reduced production levels of companies.
Recommended Best Practice Activities:
The following list of the best activities is essential for your company's survival and your growth during an economic recession. The real financial health of your business, in particular, at the beginning of the economic recession, will dictate the priority and urgency of the implementation of the following best practice activities. The nuts and bolts ...
1. Diligently Monitor Your Cash Flow - Forecast Your Cash Flow monthly to ensure that expenses and planned expenditures align with accounts receivable. Include cash flow statements in your monthly financial report. Project three cash requirements up to six months before. The key is knowing how to monitor, protect, control, and put cash to work.
2. Convert your inventories carefully: Convert excess, obsolete, and slow-moving cash inventory items. Consider going back excess and slow-moving items back to suppliers. Close or Inventory reduction sales work well for resizing your inventory. Also, consider narrowing down your product offerings. Order promptly location helps reduce occasional and excessive inventory levels material shortage. The key is to reduce the amount of inventory without losing sales.
3. Timely collection of your accounts receivable: This asset must become cash ASAP. Offer timely payment Discounts to incentivize punctual payments. Make changes to the terms of sale for slow-paying customers (i.e., 30-day net change terms to COD). Billing is an important part of your cash flow administration. The first billing rule is to do it as soon as possible after the products are shipped and/or after the services are delivered. Emphasize reducing billing errors. The majority of customers delay payments because an invoice had errors, and therefore, you will not pay until you receive a corrected copy. Email or fax your invoices to save shipping time. Post payments that have received and are making deposits more often. The key is developing an efficient collection system that generates timely payments and notifies you in advance of problems.
4. Refocus your attention on your existing customers/clients: Make customer satisfaction your priority. A regular review of your Customers' purchase history and frequency of purchases can reveal some interesting facts about your customers' buying habits. Consider signing long-term contracts with your core clients/clients that will add to your security. Offer a discount for cash payments in advance. The key is to do whatever it takes to maintain your current loyal customers.
5. Vuelva a negociar con sus proveedores, prestamistas y arrendador:i) Suppliers: Always keep your negotiations at the level of need, saying your company has reviewed its cost structure and has determined that you need to reduce vendor costs. Tell the provider that you value the relationship you have developed and receive a cost reduction immediately. Ask your provider for a lower material price, a longer payment cycle, and the elimination of finance charges. Also, see if you can buy material from them at Consignment. In exchange for your price concessions, be willing to accept a long-term contract. Explore the idea of barter as a form of payment.
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