In today’s climate of uncertainty, small businesses are facing a number of challenges.
Along with higher interest rates, cyber threats and new technologies such as artificial intelligence, there’s the looming risk of recession.
Vincent Nair, Executive Chairman and CEO of SMARTECH Business Systems discusses the steps you can take now to help build a solid financial base for your business with a focus on maximising cash flow and profit.
The right approach to cutting costs
In an economic crisis, cutting costs is often high on the agenda. However, you need to approach this carefully, making sure the cuts will serve your business in the long term as well as the immediate future.
“You want your budget to be as efficient as possible so, on an operational level, reducing or removing any non-essential expenses is a great place to start,” says Nair.
“This may include cutting back on employee travel, minimising how much you spend on gifts for clients or reducing your catering budget for events.”
When it comes to capital expenses, you may need to think about how much your spending will influence your bottom line.
“For example, if you’re planning a major system upgrade, would your business be more resilient if you put the project on the back burner and invested the money elsewhere?”
“It is important to adjust your KPIs so that they reflect the new reality”
Set realistic KPIs
During a recession, it’s important to adjust your KPIs so that they reflect the new reality.
“What worked in times of economic prosperity won’t necessarily work in the midst of a crisis, so you need to be realistic about what your business can achieve,” says Nair.
“Unattainable targets can be dispiriting. Your KPIs should be a guiding light for your team, showing what needs to be done to weather the storm.”
Motivate your team
If you’ve been planning to grow your team, you could switch your focus to retaining current employees and incentivising them to be more productive and engaged.
Remember they’re probably feeling anxious about their own future, so be sure to communicate regularly, encourage feedback and act on this where you can so they feel positive and part of a team.
Think carefully about e-commerce
Online business is a source of extra income for many businesses. However, you should approach this area with care.
“Not every small business adapts well to e-commerce,” says Nair. “Business owners should never stray far from their core competencies without putting careful risk management frameworks in place.”
The right insurance
Insurance is just as important when times are tough and there are options that will help you maintain your cover.
For example, paying your premiums monthly rather than as a lump sum upfront may be able to help smooth out your cashflow. Another choice is borrowing to pay your premium through premium funding.
You could also consider extra protection in the form of trade credit insurance. This can provide a safety net if your customers default on their invoices.
A good broker or adviser will work with you to help find a way through any downturn, ensuring you have the protection you need to help build a resilient future.
“In my nearly 30 years of business across the Asia-Pacific, I have seen recessions come and go,” assures Nair.
“I can confidently say that the best is always yet to come.”
Important notice – Steadfast Group Limited ABN 98 073 659 677
This general information does not take into account your specific objectives, financial situation or needs. It is also not financial advice, nor complete, so please discuss the full details with your insurance broker or adviser as to whether these types of insurance are appropriate for you. Deductibles, exclusions and limits apply. These insurances are issued by various insurers and can differ.
