06 November 2008

Credit crunch – Top hints in challenging times

Clients have been asking us for some advice and guidance, and now is the time to take a thorough look at your business so as not just to survive the economic downturn but be well placed to move forward when times get better.

Managing your business

Getting streamlined on processes and record keeping is imperative. Review cash flow and existing contracts and likely income flowing from those contracts, in case they can be speeded up, or delivery of them improved. Invoice regularly and promptly, and monitor payment - in the absence of payment on time, consider stopping any further work. Don’t accept excuses for non-payment of invoices. Check your Terms of Business and make sure you aren’t too generous in terms of the credit that you extend to your clients.

Review your expenditure - consider where cost savings can be made and implement them. Always keep records, as good “paper-trails” are essential as a means of showing that you are not trading whilst insolvent, for explaining actions - and if you have to pursue a client for payment, they support your entitlement to be paid.

Managing your staff

The success of a business depends on the performance and effectiveness of its staff. Communication is important at all times, but particularly in challenging times. Tell the staff what challenges the business is facing and seek their opinions. Keep them informed as to how you plan to deal with any issues arising. Are your staff doing the work most suited to them and in the most efficient way? Discuss changes with staff which might give rise to greater productivity and/or efficiency, and deal with under-performing employees in accordance with the company’s capability procedures. There may be alternatives to redundancy such as voluntary redundancy, restrictions on overtime, short-term working or laying off staff, if the contract provides. Discuss options with your staff. 

If redundancies are necessary, ensure the correct procedure is followed to avoid risk of Unfair Dismissal claims.

Managing your clients

Keep in regular contact with your clients and ensure you are keeping significant clients informed where necessary, as it strengthens trust. Use any downturn in work as an opportunity for building and strengthening the relationship with your clients. Maintain your profile in the business community but focus your marketing activities on generating specific returns and monitor their effectiveness. Make sure you look after your clients and ensure that you don’t lose any through inefficient or poor service. Review service provision if necessary.

Managing your bank

Every business is usually dependent on its banks for funding and therefore for survival.  The funding is typically in the form of an overdraft facility or a term loan or both, usually backed up by security of some kind, whether it is personal guarantees given to the bank by the directors of the business or a legal charge over the directors’ homes or both. It is imperative for you to maintain regular contact and discussions with your bank manager so that he/she knows what is happening in your business. In times of financial difficulties banks become nervous and you want to avoid your bank taking ‘the nuclear option’ of suddenly calling in the overdraft and cutting off your funding. It pays to bring your solicitors into the picture before the nuclear option is used by the bank as they can not only advise you on your options in regard to the bank’s funding and its security but also talk to the bank for you.

For further information about Hart Brown solicitors call 01483 887766 .