APRIL 2008: BIZ LIFE, HIGH FIVE
Five tips for tough times
Even though the economy is sputtering, the last thing
small-business owners should do is panic. “You can
actually take the opportunity of a downturn, when you’re
not as busy, and re-strategize your business looking for new
opportunities.” says Harry DeWolf, Portland district
director of the U.S. Small Business Administration. Here are
his top five tips small businesses should follow when economic
times get tough.
1. Don’t lose track of
cash flow. Cash is king — especially in a down
economy. Income statements and balance sheets are fine, but
they are telling you what happened in the past, not the future.
Use a cash-flow report to project your cash flows at least
three months in advance.
2. Eliminate nonessential
expenses as much as possible. Ask yourself: Is that
activity necessary? Will this activity create profit? If not,
don’t do it. Also consider cutting personal spending.
Simple reductions can make a difference.
3. Don’t build up
inventory. Don’t get bogged down with excess
merchandise and inventories tying up your cash. Convert your
overstocked inventory into cash by using sales and promotions
and consider selling items through other channels, such as the
Internet.
4. Don’t take on new
debt. Think long and hard about taking on more debt, and
don’t be in a big hurry to pay off debt early. Instead,
focus on building cash reserves.
5. Don’t let accounts
receivable get too big or too old. Get aggressive with
collections. When business is good, companies tend to become
lazy about collecting on receivables. Being tough with
customers may be unpleasant, but it’s an important
safeguard against the effects of a prolonged economic
slowdown.
EVAN CAEL
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