Partner Article

Top tips for surviving the post-recession

AZHER Quyoom of North East and London-based law firm Dickinson Dees looks at the post-recession landscape with some advice on how to ensure that your business is geared up to take advantage of the post-recession.

Much has been said and written about the credit crunch and the recession in the UK. Businesses undoubtedly continue to face tough times ahead with no-one daring to speculate on when the green shoots of recovery will emerge. The practical and straightforward tips on how to make your business leaner and tougher in 2009 still apply to 2010 and beyond.

1. Cash Flow Management

Put cash flow and financing on the agenda at every management meeting and review your current account on a daily basis. Focus on debt collection to ensure that your work in progress is converted into income. Bill early and bill often.

1. Cost Cutting

Review expenditure to identify where savings can be made. Where possible, consider cheaper options.

1. Credit Control

Credit check customers and satisfy yourself that they will be able to pay your bill when delivered. Check your terms and conditions to ensure you can recover goods in the event of non payment of your invoices.

1. Suppliers

Don’t be afraid to approach your suppliers in order to re-negotiate terms of supply. Whilst the initial reaction may be negative, businesses will not want to lose good customers.

1. Communication

It is still good to talk. Keep in regular contact with customers, suppliers, bankers, accountants and legal advisors. Good communication can often identify problem issues before they arise. Use the telephone to speak to your trading partners rather than email, people find it harder to say no on the telephone.

Funding Your Business

Many companies nowadays rely on some form of third party funding to run their business. Now maybe the time to consider alternative forms of funding such as factoring or invoice discounting.

Defer Capital Expenditure

It sounds simple but if you do not have to spend money, then don’t. Stagger the replacement of business assets or look at different purchasing options such as leasing.

Employment

This is probably the single largest regular expense for any small to medium sized business. Identify who your key employees are. Review employment terms and bonus and incentive schemes and implement changes if necessary.

Maintain Your Records

Our experience tells us that one of the first areas to lapse in hard times is record keeping. However in tough economic conditions record keeping can make the difference between failure and success. Funding, sales and purchases can all hinge on good up to date record-keeping.

Be Prepared For Change

Successful businesses are the ones which adapt and change according to economic conditions. Recessions often give rise to long put off change in businesses. If you followed the above advice, then the chances are that you will have survived the worst of the recession, but what does the future hold?

There are genuine fears that weaker businesses will continue to fold as the economy slowly begins to improve, the public purse is squeezed for savings and private businesses and households continue to maintain tight control of their own budgets. Government steps to make efficiencies and savings will be matched by pressure to collect in debts and we are already noticing a toughening of HMRC’s attitude to companies proposing to enter into “Time To Pay” arrangements.

If your business is struggling, then there are many restructuring and turn-around procedures designed to help you survive tough periods where simple but practical changes to how a business is managed can lead to improvements in cash flow and profitability without the use of a formal insolvency procedure.

If the pressure, such as demands to pay a debt, is severe, there may be no other option but to rely on a formal insolvency procedure. Schemes such as Voluntary Arrangements are designed to protect businesses and jobs by allowing companies to reach binding agreements with creditors to repay debts over a period of time. They are often used where the underlying business is profitable but historic debt prevents the business from moving forward.

In a worst case scenario, steps can be taken to protect a business from creditor pressure even on the day of a winding up petition. However, the earlier problems are identified and acknowledged, the more options there are available to you and your business with the benefit of professional advice. Take advice sooner rather than later and before it is too late.

Azher Quyoom is a solicitor in the corporate recovery department at Dickinson Dees LLP. For more information, contact Azher on 01904 464 449.

This was posted in Bdaily's Members' News section by Ruth Mitchell .