Making predictions is never easy, especially for small business owners and managers. Unlike their larger counterparts, small firms rarely have the resources to monitor and take corrective action for every new trend and issue. Even entrepreneurs who’ve experienced numerous business cycles face new circumstances that confound their instincts and knowledge.
While there’s no crystal ball that accurately predicts the future, small business owners and managers can take steps to help their enterprises endure the worst of times and take advantage of the best of times. Perform a small business heath checkup to determine if your company is ready for the coming year.
First, talk to your banker about your company’s financial status. Lenders offer experience in advising managers and owners on issues specific to their businesses and industries. Have them review your year-end financial statements and offer an honest appraisal. Talk about establishing a line of credit, which could stabilize your cash flow position in 2018.
Second, strengthen relationships with creditors. It could be time to renegotiate terms or change payment amounts on overdue bills. Overdue bills and inconsistent payment practices won’t help your long-term credit position. What’s more, your creditors could be experiencing financial difficulties as well. Any flexibility will hinge on whether they perceive you as a reliable partner or a risk they want to eliminate.
Next, keep a close watch on your receivables. Review who owes your company money and make sure they’re meeting terms. Be firm when dealing with problem accounts, but also remain willing to negotiate when appropriate. With a little encouragement, a struggling customer could become a long-term source of income. The longer an account receivable ages, the harder it becomes to collect on that debt.
Fourth, make sure all expenditures are justified and contribute to the financial health of your business. You might find it necessary to redirect money to areas that will enhance business performance. If you carry an inventory of products, check the accuracy of your records and procedures to prevent losses. It could be helpful to adjust your order amounts to match projected sales. Now is the time to review management and employee expenses to determine if they’re justified and meet the mission of your business.
Fifth, review your operations and expenses on a regular basis. If you monitor your profitability on a monthly basis, it might be a good idea to begin reviewing it on a weekly or bi-weekly basis during slow economic times. Likewise, review and update your business plan more frequently.
Monthly or quarterly reviews make it easier to make adjustments and keep your business on track.