Business Uncertainty and Tough Economic Times

Uncertainty, especially business uncertainty remains at the top of mind for most South African businesses. Perhaps now is an ideal time to look at ways you can successfully manage your business through these uncertain times. When times are good and the product is moving, companies can run a little blind. It is not unusual to discover that your processes and procedures have not been monitored as closely or as critically as they possibly could, or should.

Reducing costs and overheads is usually the first place to turn to when market conditions tighten. But cost-cutting is never as simple as it may seem. It may even prove counterproductive if it diminishes your competitive edge. Perhaps the first place to look is your own backyard, particularly at the systems that should be providing you with a window into how things really are. Needed is a real and right time view on all components of the business workflow cycle. This includes stock control, sales, servicing, customer contact, invoicing, financials and reporting.

Having accurate information on your costs and production flow allows you to take advantage of opportunities to improve returns from all areas of the business. What you don’t need is to discover that your picture is only partly right. This can occur when you are relying on information from one operations area and applying it to another when that information is not up-to-date, not coordinated, and not in line with your overall plans. You can eliminate this risk and reduce associated administration effort with accounting and business workflow solutions, which provides an all-in-one system that goes beyond traditional accounts information. It simplifies and incorporates all elements of a business into the one integrated information resource to provide an accurate picture on how things really are. So what steps can you take in response to a tougher business climate?

1. A review of your debtors is always good management practice. When business conditions soften it becomes even more important to be well focused on people who owe you money. Chances are they are facing challenges similar to yours. Look for signs of a customer experiencing cashflow problems i.e. payment cycles growing longer. It may be time to offer customers incentives for keener payment terms.
2. Avoid non-essential costs. Cost control should be an ongoing part of the management function. Think of each Rand your business spends being just as accountable as an investment in equipment. If your Rand spend is not returning you at least a three-fold return, then chances are you are not maximising its return. You may even be losing money.
3. Walk the floor. Talk to the people involved in ALL the processes in your business and the users of these processes. Most employees are capable of identifying ways to reduce costs, especially when it applies to their work area. You employed these people because they are intelligent people capable of independent thought; they usually have the answer you are looking for.
4. Get your back-end systems in order. It is important for your business operations to work as efficiently and consistently as possible. Be aware of a lack of integration between your systems and the inefficiencies this brings, i.e. staff involved in administration who could be deployed elsewhere, and the time it takes to complete tasks. Are there holes that need to be filled: leakage you don’t know about, lost sales, unbilled stock, unbilled hours, and unnecessary costs? What about your stock control systems? Is everything being billed correctly and at the correct price? Is there some stock that is not being accounted for? Are you accurately invoicing your customers and on time? Are ALL purchases of stock tied to a job? If not, why not?
5. It may be time to survey customers to identify opportunities. Would customers be interested in more flexible delivery times and payment terms? Are they fully aware of the range of goods and services you offer? Is there something they want that you can produce or source? Start making some calls yourself. Talking to customers about their business will give you a better perspective on your own. Make sure your sales team and front office personnel are just as keenly focused on customers and their plans as you are.
6. What adjustments are needed to strengthen your customer relationships? What does your business have to do to meet their changing needs? Having the right products for the right customers becomes even more essential when business conditions change. Stock and purchase controls become critical when sales slow. An accurate view on the changing needs of customers can come from regular assessments of purchase orders and the products left on shelves.
7. When the market outlook worsens, it makes sense to focus on the products and services that sell. So it may be time to cut, reduce, modify or change those that don’t. Slow moving goods on the warehouse floor have to be shifted. They may need to be discounted to move them. It may be a good time to revise your inventory position and set new targets. It makes sense to ensure that your marketing investment is closely linked to sales, and sales and purchasing work in tandem. Evolution, not revolution is challenging when a business faces changing market conditions. However, staying focused on your goals and objectives provides a framework for your decision making, especially when you are considering options to reduce your overheads. Be aware that short-term gains may prove expensive if you lose the capacity to pursue longer-term opportunities.
8. Consider low-cost marketing channels such as online marketing, prospect emails and search engine optimisation (SEO). These methods of direct and indirect communications are introducing businesses to many new potential customers. Allowing people to more easily find your business and your products can prove extremely beneficial to the bottom line.
9. Staying positive and open to new ideas and opportunities is critical at the best of times. If the future looks uncertain, it may be a good time to review ways to re-engineer operations. If the answer to the question “How do you do business?” is “The same way we’ve always done it!” then it may be timely to have a hard look at your business from the most basic components of your operations through to the management reports you are using.

A summary…

• Keep a close eye on who owes you money and maybe look to offer them more flexible payment terms. Remember they’re probably going through the same struggle you are.
• Cut non-essential costs. If a Rand spend isn’t giving you at least a three-fold return it probably isn’t worth it.
• Get back to basics and ask your frontline staff where they think you could save money or do things smarter.
• Get your back-end systems in order. Make sure they’re efficient, consistent and integrated.
• Stay close to your customers and improve relationships with them to increase the chances of repeat orders.
• Stay positive and open to new ideas!