Get back to basics to come out stronger

Drive down the street and you can’t miss the empty storefronts, more and more every week. If you wanted to find new office space, it’s a great time to negotiate an advantageous deal. Let’s face it, we’re seeing businesses fail all around us. Bankruptcy filings in the Federal courts were up 31% in 2008.

Better businesses can come through the recession, and even find opportunities to best competitors.   They’ll be stronger and in a better position to pick up market share.  Prudence dictates watching costs carefully, and getting back to basics.   What would you do if you were starting from scratch?

Try going back to business basics rather than chasing new debt.

1. Consider zero-based budgeting.   It’s a fundamentally good business practice in any industry, and it’s smarter than ever now.  Many businesses start the budgeting process by looking at last year’s expenses.  Starting from zero means you won’t perpetuate old ways that might not be the most effective in this economy.  You might budget more this year for marketing, for example, because you’ve lost some clients and telemarketing has proved successful in the past.  But do you really need six different brochures for  sales appointments, when most of your clients learn about you from the web?
2. Even if you’re not starting from zero, drill into every expense area.  Ask:   Do we need this?  Are you sure?  Why do we need this?  Can it wait?  Can we get it cheaper?  Is it a necessity or a luxury? Ask every vendor to lower their price.  If they won’t and the product is a commodity, shop around.
3. Reduce your inventory.  If you’re a manufacturer, wholesaler or distributor, careful inventory management can yield substantial cost savings.  Get inventory levels down as low as you can, without risking customer service.  Identify distressed inventory — are you carrying product that will never sell?  Order the minimum you really think you can sell.
4. Watch cash flow like a hawk.   Look at credit before making the sale, and if it’s questionable require payment in advance.  Bill timely, and get paid timely.  If you don’t get paid, suspend sales or service and follow up like crazy.  If you don’t have the stomach for it, engage collection professionals.  If your company doesn’t have a collections policy, put one in.
5. Make  sure you have the right people in place to implement savings strategies.   A medical practice trying to cut costs by reducing administrative staff, for example, will likely regret it if they lose the resource that understands coding, billing and collections.  The complexities of payment in healthcare require expertise that shouldn’t be undervalued.

In most cases, getting back to business basics is a better strategy than adding to debt.