by Gina L Gwozdz CPA

Created on: April 29, 2008   Last Updated: May 08, 2008

Don't let the housing market, rising gas prices and the election year fears negatively affect your business. Traditionally small businesses have been hurt the hardest when the economy takes a downturn, but traditions do not need to be repeated. Today's small business owner has the resources to plan, monitor and take corrective action, as needed. And just what should small businesses be planning, monitoring and taking corrective action on?

Review your operations: Now is the time to review all your expenses and determine the necessity of each. Are there any areas where you can save money? If you have inventory you want to make sure that if your turnover slows so does your purchasing. Do you need to stock as much inventory as you have in the past? How high is your inventory damage/loss? Are there proper controls in place to reduce the amount of loss inventory? Is there any expense that you can eliminate because it's not vital for business success? Can you reduce the amount you spend on travel or entertainment? Is there any aspect of your business that you can outsource? If you can outsource part of your operations at less than your hourly you're improving your cash flow.

Review your suppliers: It is good business practice to get bids from at least 3 different suppliers before selecting one for all your business needs. In addition to looking at the end price remember to consider the cost of shipping, return policies, their payment terms and your past history. If you were to need a payment extension would they be willing to work with you? If you need a rush order, will they cooperate?
Review your bank and banker: Bankers can be an excellent resource on specific financial issues related to your industry. If your banker doesn't seem knowledgeable about your industry find someone else. The time to set up a line of credit is before you need it. This way if you have an unexpected delay of cash flowing into your business, your operations will continue to run smoothly until things turn around.

Review your customers/clients: Every business should know who their good customers/clients are and who are the ones that they need to keep a close eye on. Remember that every paying customer/client is a customer/client you want to keep; the focus should be on managing them. If one of your historically good customers/clients is beginning to pay slowing or perhaps they aren't purchasing as much as they use to talk to them. Are they going somewhere else? Is there anything they need/want that you do not currently offer? Don't be afraid to offer payment plans for customers/clients who need them. It's better to be paid over time and use your line of credit if necessary then to lose a sale completely. The key is knowing and understanding your financial situation so you will know if you need to charge them a fee for this service or have a small adjustment in the price of all your products/services that you sell.

Review your marketing: A down economy is the perfect time to market because many of your competitors will stop marketing. This is your time to take center stage. You will be reminding your current customers/clients that you're still around and that you're available to take on more work.

A slowing economy is a time for you to evaluate your business and prepare for the challenges and opportunities of the future.

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