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Tools and techniques to help your business survive the recession

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5th Aug 2008
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Buddy, can you lend a hand?Rather than rehashing well known business clichés, technology editor John Stokdyk seeks out suggestions from business and technology experts about specific tools and techniques for running a tighter ship during hard times.

In common with many other business advisers, the Federation for Small Business and finance consultants ASC recently published some tips for dealing with the recession.

Like many such lists, the advice included several of the standard business clichés including:

  • Focus on your unique selling points
  • Plan ahead; and
  • Manage your costs and move to a lower cost base.

There's absolutely nothing wrong with these hoary chestnuts - they have become clichés because they contain elemental truths that people always come back to.

But much of the current recession survival advice is quite clear about what you're supposed to do, but offers precious little help in getting you there. To fill in some of the missing gaps, we solicited suggestions from business and technology experts about specific tools and techniques for running a tighter ship. These are ideas to get you started. If you want more detailed guidance, it's worth bearing in mind another of the FSB's suggestions: "Seek professional advice - don’t be afraid to ask for help."

1. Work the phones to improve your cash flow

Cash is essential to the survival of any business. Gary Aldrich, a US finance executive, points out that the good old telephone is one of the most effective cash management tools there is. "Be sure to work the phones often and early to collect receivables. Don't wait until the account becomes a problem," he advises. It's harder to ignore a telephone call and you can be far more persuasive and diplomatic in a one-to-one conversation than through any other medium.

While on the subject of telephones, have you reviewed how much you spend on them recently? Making capital investments is tricky in a recession, but if you're paying significant amounts every quarter to a traditional telecoms provider, internet-based alternatives can save money as well as open up more flexible ways of communicating. Stewart Twynham's VoIP blog detailed how one client expected to save £1,800 a month from a £24,000 VoIP system, achieving a payback within 15 months. More advice and information sources are available from the IT Zone Focus on voice over internet (VoIP).

2. Accelerate billing processes and tighten credit control

Billing and credit management are repetitive processes that lend themselves to computerisation. Do you have facilities to speed them up within your current accounting systems, and are you using them to the full extent? Most programs will include tried and tested formats for debtors reports and credit control "to-do" tasks. If you don't have these facilities, it may only require a small investment to add them to what you've already got.

The internet is another essential cash management tool. Save on postage and speed up invoicing and payment processing by emailing invoices and reminder statements. Making and accepting payments electronically via credit/debit cards and BACS can also reduce costs and give you much better control over cashflow. Finally, if you'd rather concentrate on running the business than chasing invoices, there are a number of factoring and invoice finance providers who can manage your debtors list, and some can link electronically into your existing processes. The recent Sage whitepaper on surviving the credit crunch offers lots of practical advice on this subject.

3. Manage your costs more effectively

Good accounting will improve your insights into your business expenditures. Your systems should help you analyse key costs of the business, the first step towards rationalising your cost base. If you've got the time and inclination to take this discipline further, consider using activity-based costing (ABC) to analyse your business running costs in more detail. Rather that assuming your overheads are absorbed broadly across your range of products or services, ABC encourages you to model your expenditures more accurately to help you identify and focus on the most profitable elements of the operation. Specialist software is available from the likes of SAP (Business Objects) and SAS Institute, but some mid-range accounts systems also have built-in ABC facilities.

Other specialist applications can help you keep a tighter hold of employee expenses and your fixed assets and stock. As Stephen Moriarty of asset management software house Assetware succinctly puts it, "The best way to save money is to stop spending it unnecessarily." Asset management systems can track what you own more effectively to eliminate unnecessary purchases. It can also reduce pointless insurance premiums and lease/maintenance payments on kit you no longer use.

Expenses, meanwhile, can be administered very effectively using online systems from companies such as Web Expenses or Concur. Good inventory control is essential for stock-based businesses, so a stock management could give you a payback if it helps you reduce the amount stock you hold.

4. Improve planning and forecasting

Given the importance of cash to the business, it's no surprise that most of the experts consulted for this article returned time and again to the importance of cash flow forecasting. A good cash flow forecast lets you see in advance what your funding requirements are likely to be so you can put in place the lowest cost finance package. The cash flow forecast is tied to profit and loss account forecasts, but makes allowance for the lags that occur between making a sale and the payment clearing your bank. It will also factor in non-trading transactions such as loans and interest payments. Jyoti Banerjee of M Institute recommends using the online Rugged Logic spreadsheet system for this purpose, while accounts packages such as Sage, QuickBooks and Mamut now have companion forecasting modules that can work directly with data from your day-to-day ledgers.

Comparing your current data to previous periods can help you measure the progress you are making, or uncover underlying problems that you need to address. This is the essence of forecasting. Basing your growth plans and budgets on solid historical figures will keep them realistic, while returning to the forecasts to see how your actual performance compares will make it more likely that you achieve your targets. Sage has also published a whitepaper on forecasting this month with more advice on these techniques.

5. Use the internet as a marketing tool

A time of recession when rival organisations are cutting back on extraneous costs is when you can make more impact with well directed marketing. And the internet has spawned a cornucopia of new, low cost approaches you can try. First up, you should communicate more effectively with your existing customers, as nothing is more profitable than repeat and referral business. Via LinkedIn, Ashutosh Bose, a business analyst at KPIT Cummins Infosystems, recommends starting up a company blog to update people on what you are up to and sending regular e-newsletter to all your stakeholders and customers.

But why stop there? You can build up your online presence by participating in social networks and sites like UK Business Forums. With so many free services and sites around, often the only costs involved will be the time you commit to it. Learning about search engine optimisation to improve the rankings of the sites you operate (and referring to them in other posts that you make) will also pay dividends. And finally, with the way fuel prices are going, now is a good time to beef up your ebusiness capabilities. If you haven't already done so, look into systems that will let you take orders and payments for your goods and services online. You can get up and running pretty quickly on sites such as Microsoft Office Live Workspace (Store Manager module not available yet in UK), BT Tradespace and eBay/PayPal, but your internet service provider and web agency should also be able to give you cost estimates for more professional facilities.

6. Get more out of your existing systems

Ben Cooper, sales and marketing manager for Chichester-based software reseller ATW, notes that companies don't always get the most out of their financial systems - even when some of the bells and whistles were why the company chose the software in the first place.

"These added benefits/differentiators sometimes get relegated to the back burner - or maybe even forgotten," he says. "By taking a proactive approach and reconsidering why you took that software on, you can rediscover all those business tools you looked at but never acted on when you purchased the software. We are now spending a lot of time working with our customers to write those non-standard reports which give them visibility over their organisation or looking at whistles and bells that reduce their costs and make them more efficient during leaner times. Our tip is to put your system to the test and see what else it can do for your business."

7. Invest in training

Training budgets are usually the first in line for the chop, but if you focus your training budget on boosting your team's productivity-enhancing skills, you can reap impressive rewards. For example, one of the reasons why software may not live up to expectations in the scenario described above by Ben Cooper may be because the people running it may not have been properly trained to use it.

As AccountingWEB contributor Simon Hurst points out frequently, shaving just a few seconds off a task that you regularly carry out at work can start to build up into significant savings over the course of a working year. For someone with a charge-out rate of £120, saving just one minute a day of their time would add up to £250 within a year. A good training course on the right subject would probably generate even better returns.

8. Go green

According to Jyoti Banerjee, the recession is a very good reason to start slashing your carbon-related costs and to greenify your supply chain by getting closer to customers and suppliers. These disciplines don't just make good business sense by saving you money, he says, "They are imperative for every business on the planet to transform their carbon productivity." Government tax allowances are there to encourage spending on energy-saving technologies and the investments you make will reduce both your running costs and your carbon footprint. To keep track of your progress, Banerjee recommends Access Accounting's Accounting for Carbon Emissions as a useful tool for this.

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Replies (5)

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avatar
By valentinee
20th Apr 2009 18:42

internet fax
It's very convenient to use an internet fax service instead of the fax machine. It needs just the internet connection, and there are no more money spent for paper, toner or repair affairs. I use Popfax.com and it's wonderful for me.

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avatar
By User deleted
14th Aug 2008 17:37

Re: FOSS
I agree, why buy excel with it's "premium" content that many struggle to find a use for, when you can use OpenOffice.org for your everyday needs.

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avatar
By AnonymousUser
13th Aug 2008 19:12

Talk to the bank
In these times of tough credit, maintain a regular dialogue with your bank. Many of those who have left it late to discuss renewal terms are finding themselves in a critical situation as the banks' lending criteria harden.

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John Stokdyk, AccountingWEB head of insight
By John Stokdyk
07th Aug 2008 16:57

Article corrected
Thank you for alerting readers (and me) to the error, Mark. With all the consolidation that has taken place, I should have checked more carefully before trying to guess who bought Business Objects (and ALG, the company I was thinking of). I was bound to get it wrong.

Wrist has been slapped - and I'm planning to follow this up to solicit some more detailed information about ABC software and techniques for a future article.

Apologies to all concerned.
John Stokdyk
Technology editor
AccountingWEB.co.uk

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By Martyn.Shiner
07th Aug 2008 13:27

Use FOSS
>>
Tools and techniques to help your business survive the recession
<<

Use free and open source software and avoid the Microsoft tax (currently 15-20% on UMPCs)

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