5 More Ways to Think Straight in Difficult Times.
Immediate and tough decisions must be made.
Make those difficult decisions.
It is not possible to save a company in trouble by carrying on doing the same thing you have been doing. More of the same will result in more of the same and delaying making decisions will just make thing even harder down the road. KCBC can help you make these tough choices.
5 things you just have to do:
1. Cut costs
This may seem obvious, but it is harder to do than you expect. One approach is to appoint your FD to make the decisions. And the decisions must be made to cut every cost possible. When our company managed its way through the last recession, we found costs to cut that I did not even know we had. By giving the role to the FD it is a depersonalised process and so your pet projects are not spared. Nothing is exempt. Travel, expenses, marketing, repairs, R&D, everything. If you do not have a FD then the jobs falls to you. Spare nothing.
2. Cut jobs.
Do not be sentimental. There is nothing sentimental about your house being repossessed or your car being towed away or closing the doors for the last time. If you must make job cuts to save the company, make them. Be methodical and be fair but reduce those costs effectively and immediately. If you try to keep staff on you cannot afford then you may end up making everyone redundant rather than just some. They say that, if it isn’t hurting then you are not doing it right. It needs to hurt.
3. Delay paying everything, grab every payment.
Cash is king. You must make sure you don’t run out of cash. Fight for every penny to stay in your bank account and not in anyone else’s. You can’t spend money that your suppliers have, that the tax man has, that your accountant has. You can’t spend money that your customers have not paid you. You must be methodical and precise. Keep good records of what you say and what other people promise you. If a customer promises to pay on the 4th, phone them on the 4th to make sure they have paid. If you promise to pay someone on the 4th, keep that promise and only make it if you can keep it. This will build credibility and confidence and trust.
4. Clamp down on all spending
The best way to cut costs is to avoid them in the first place. Cutting costs means making sure that you put a strangle hold on all spending. No one is exempt. Take away all authority to spend money and take away credit cards. And put in place systems to ensure the checking and double checking of all purchase orders. Clearly a purchase order is, in effect, a promise to pay. The cheque has to follow sooner or later. Use whatever stock you can, check what you have before you buy more. As crazy as it sounds, I once rescued parts from a skip to incorporate into a product to ensure a delivery went out. Make sure no one can make any promises to pay, such an engineering cost that is incurred without a purchase order. Every single cost has to be justified and backed with a PO that you have authorised. Make these rules clear to all concerned. Make sure your suppliers are aware that a PO is not valid without your authority. Use those discussions to get improved terms, better prices, more credit, time to pay and for your company to recover.
5. Sell, sell. Sell.
Sales are the fuel that keeps the machine running. Cash is the oil, but if there is no fuel, then the engine will stop anyway. It may be some time since you were directly involved with many of your customers. Its time to get personally involved again. In many companies the sale were originally done by the owner, so you may have to revisit those days. Get close to customers and use the discussions to improve terms, improve margins, reduce credit terms. Its is not easy, and it will not always work but you need to keep the order book as full as possible. Don’t be passive. Be active. Very active.
KCBC October 2020
Contact KCBC to help make these difficult decisions and save your company.