Presenter: Susan Lennon, Tax Manager, Anne Brady McQuillans DFK. Susan presented a useful framework for looking for ways to better manage your cashflow, under the following headings:
1. ACT ON REDUCING COSTS AND RISKS
Recent research has shown that SME’s are taking steps to reduce costs in a number of areas. By far the most important area is cutting overheads (90%) but other common measures are hiring freezes and reduction of cost of sale. Less commonly used are pay freezes and redundancies.
Telecommunication costs are the biggest source of overhead reduction (90% of companies) and other measures are cutting travel/entertainment and staff training).
2. TAKE ACTIONS TO INCREASE PRODUCTIVITY
Mantra should be to work smarter and slicker.
Use new technology – this is a key means for SMEs to improve productivity
Research has found that most (70%) SMEs achieve productivity improvements through the use of technology and longer hours or other measures account for the minority of improvements achieved.
3. TAKE ACTIONS TO IMPROVE CASH FLOW AND MINIMISE BAD DEBTS
Most companies are facing more bad debts or at least slow payment of debts.
You need to be careful with any new contracts: Can/will they pay? What if they can’t? Staged payments can help.
There are a number of steps you can take to reduce bad debts such as asking for
references, Some are offering 30 days credit at most and some are even asking for cash up front.
Recent research shows that small companies are taking measures to minimise bad debts, the most popular being cash up front (78%), followed by early payment discounts (28%), credit checking (13%) and finally by using collection agencies or cash collection technology.
Invoices and statements must be issued on time (maximum two days after month’s end).
You need to keep a list of your debtors showing who owes money? For how long?
A solicitor’s letter can be very effective if no response.
ASSESSING CREDIT
In order to access credit from banks, you will need
Security – land not what we want now.
Business plan – difficult to project forward at the moment but have to make best estimate.
Cash flow projections
Latest financial report.
There is no point in approaching the back without all of these.
DEALING WITH DEBTS
You need to divide your debts into priority (ones that have to be paid such as rent/mortgage/court fines) and secondary (no security - credit cards, etc)
The best thing is to be up front if you cannot pay a debt, especially with Revenue. If you write them a letter and ask for a month or so, they will normally grant the extension. You do need to meet whatever commitment you make.
You can offer to pay a debt over a number of months. Write a letter with the part payment.
You need to have a budget to help you to maximise income and minimise expenditure.
DEALING WITH REVENUE CHALLENGES
Companies are having to take measures to deal with lower revenue levels.
The key thing is to let customers know about the value you offer rather than cutting prices across the board. You might be able to creae a range of low and high value offerings to meet all parts of the market.
Try to reduce costs/inefficiencies so that you can keep your prices keen. Streamline your product/services as much as possible – strip out nonessential elements.
Her tips on recession pricing were as follows:
Don’t discount your priducts/services in order to compete.
Don’t reduce price of high value parts of your offering.
Develop some low value products/services to meet the needs of customers with limited resources.
Don’t play poker with customers choosing purely on basis of price.
These notes are from the presentation to the Dublin City Enterprise Network for Women. Join today for only €100 for 2009 membership.