By Ken Hein
Whether or not the U.S. economy is mathematically in a recession, one fact is clear: consumers and businesses (clients, for example) are concerned. So, many experts suggest that small and mid-sized businesses take steps right now to insulate themselves from potential hardships. These strategies include keeping a sharp eye on everything from cash flow to office supply expenditures.
"Purchasing office supplies can be one of the greatest sources of wasted money in any business," says Stacey Anderson, president of Organized Innovations LLC. "Take the time to streamline your ordering and inventory processes. Have a checks-and-balances system in place, and communicate the changes and procedures to employees."
When it comes to dealing with industry suppliers, now may be the time for distributors to find out how far terms can be stretched. "Invest in relationships with suppliers. Are there things that you can do to get better terms?" says Angelo Santinelli, adjunct professor at Babson College in Wellesley, MA. "Chances are they are hurting as well, so figure out a way to share the pain."
Matt Kutchinsky, a CPA with Citrin Cooperman, also suggests renegotiating with suppliers. "Many vendors will provide a discount for payment up front," he says. "Others will provide discounts to loyal and longtime customers. Request an extension of credit with them, so that your business can pay invoices in 60 days, not 30."
It may also be time to find out how far your sales staff will go to dig up new sources of revenue. "Watch more closely for places to upsell to current customers," says Linda Finkle, CEO of the Incendo Group, an organizational coaching and consulting company. "Perhaps you've gotten a bit lazy in keeping in contact with them. Now is the time to reconnect, find out their needs, how their business is growing and changing and how you can help. Do you have a new product or service that could benefit them? Connect, and look for sales opportunities."
On the other side of the coin, "watch receivables closely," Kutchinsky says. "They can be an indicator of how hard your clients are being hit by an economic downturn, and could be an indicator that they are going to cut back on their purchasing."
Keeping an eye on cash flow is more critical now than ever. Almost half of small businesses (49%) are currently claiming cash flow concerns, according to a recent survey conducted by American Express Open. Raymond Joabar, senior vice president and general manager for American Express Open, says, "Knowing how to measure, monitor and manage the cash that flows in and out of a business is a vital skill, and it's even more important in times of economic downturn when cash is often scarce."
KEN HEIN is a contributing writer based in Basking Ridge, NJ.