How to survive the crisis: 8 recommendations for business

How to survive the crisis: 8 recommendations for business

Sometimes in a crisis business is forced to switch to austerity mode. Financial reserves are practically exhausted, nonessential expenses are cut to zero. What else can be done to keep the business afloat?

Giving up unprofitable resources

It’s a good time to use ABC analysis if you haven’t done it before. In a nutshell: goods, services, or counterparties can be divided into three categories.

A – 20% of counterparties, services or products that generate 80% of revenue;
B – 30% of counterparties, services, or products that generate 15% of revenue;
C – 50% of counterparties, services or products that account for only 5% of revenue.
The task of the company is to direct maximum resources to the maintenance and development of the most profitable directions of activity, formation of relations with the priority clients. The time and financial costs of Group C elements should be reduced. Reconsider your work with this category of counterparties, goods or services.

Recently our management accounting service has introduced ABC-analysis of counterparties: the system automatically divides all your payers and recipients into groups based on the total amount of payments for the selected period.

Save on purchases of raw materials and goods

Yesterday it was too expensive to buy raw materials in your region and you had to bring them from far away, but now the suppliers are ready to make concessions. This means that there is an opportunity to save money on transportation costs.

Ask for discounts from the old suppliers. Try to negotiate payment for goods or services in installments. A loyal clientele is more important to them now than one-time high-priced sales.

If possible, look for quality analogues of materials, raw materials and components in the domestic market. Savings on customs duties, transportation, exchange rate fluctuations will reduce the cost of production.

Optimize fixed assets

A company’s assets have to work. Unused equipment, furniture, computers and vehicles are ballast. Do not sell items without which you can not do the work now. Sell what was not used before the crisis, idle, waiting for better times. By the time the business gets out of the doldrums, gets back on its feet and begins to expand again, so that it will need an analogue of the sold property, a lot of time will pass. During the period of downtime, the property will wear out. Maintenance, repairs, replacement of components, upgrades will be required to get it going again. And businesses need cash today.

Do not inflate the price and do not expect the object will go instantly. A buyer will find one sooner or later. Maybe right now someone is moving to a smaller store without trade equipment, someone’s only truck broke down to deliver goods to points, or production has stopped because of a machine breakdown.

Sometimes selling a fixed asset is not profitable. For example, an entrepreneur on the simplified tax system 15% sells property with a useful life of 15 years, and three years from the date of recording the cost of this property in expenses has not yet expired. Then additional tax will have to be paid to the budget when the property is sold. Or the potential buyer may not have the funds to pay for the purchase immediately.

In such cases, the property may be leased or a lease with the right of redemption may be concluded. Then the lessee will be able to pay the redemption value some time later and obtain full ownership of the object. For example, an entrepreneur has leased out several refrigeration cabinets with the right of redemption. The parties have established the following condition in the contract: the amount of the redemption sum is equal to the sum of the lease payments for the entire lease period. Thus, the lessor will receive regular income during the term of the contract. And after its termination, the tenant will take possession of the property without additional payments.

Reduce working hours

The turnover of companies is falling, which means that their workforce is not working at full capacity. Then the staff can be moved to part-time work. For example, transfer some employees to half or a quarter rate, introduce a four-day work week for the company as a whole.

Set the schedule of the company in the rules of internal labor regulations. Transfer certain employees to part-time work by means of additional agreements to their employment contracts.

Thus employees will be able to keep their main place of work and find options for part-time work in their free time. And the company will retain skilled workers and be able to save on wages. In addition, the company can offer some employees to expand their work functions.

Expand the job functions of employees

The task of a good employer is to keep the staff and give them the opportunity to earn even in difficult economic conditions. It is possible to combine some positions, to expand the functionality of each staffing unit.

For example, salesroom managers can moonlight as typesetters – completing orders for delivery to customers. Loaders can connect to the delivery of orders as couriers.

Employees are entitled to extra pay for combining professions. Obtain the employee’s written consent to combine jobs, conclude an additional agreement to the employment contract specifying the amount of extra pay, and issue an order.

Cancel seminars and trainings

Make a list of planned courses, seminars, and trainings. A webinar for an HR manager on legislative changes is important, and a month-long language course for a regional manager can be postponed until better times.

If optional employee training programs were paid for in advance, try to return the prepayment. Check to see if you have any prepaid attendance at conferences and trade shows.

Organize joint activities

Several companies or sole proprietorships can combine their assets and enter into a simple partnership agreement. How does this work? Each party makes a contribution. For example, equipment, transport, the right to use rented premises, labor, professional knowledge and skills. From among the parties to the contract, one is chosen who will keep track of the financial results.

Then each entrepreneur performs his or her function: producing, selling, building, delivering, repairing, training. All income and expenses from working together are accounted for in a common boiler. At least once a quarter, the person in charge calculates the profit and distributes it among the participants in pre-agreed proportions. This approach allows you to reduce costs, expand clientele, load the staff.

It is possible to conduct joint activities only on the expense tax regimes: general, simplified 15%. Transactions within the framework of a simple partnership are subject to VAT, and exemptions and deductions can be applied. Profit tax is paid by each party according to its tax regime.

Example. Two entrepreneurs with the simplified taxation system of 15% concluded a simple partnership agreement. The first one is engaged in cargo transportation. His contribution: trucks, labor, accumulated customer base. The second deals with logistics. His contribution: his own office space, rented warehouses, human resources. Now comrades provide services to customers for the transportation and storage of goods. Administrative staff uses a common office. Dispatchers trucking company at the same time taking requests for transportation and storage. Records are kept by a common bookkeeper. Managed to expand the clientele, because now the counterparties of the parties can get a VAT deduction.

Working with accounts receivable

Overdue accounts receivable seriously worsens the company’s financial situation – no one is better off lending someone else’s business for free. Accounts receivable should be monitored from the first day of liabilities. Remember, control of accounts receivable is not only duty calls to the debtor from your subordinates. This is a constant contact with the management of the counterparty, a joint search for the best way out of the situation.

Offer discounts for the timely fulfillment of obligations. Limit the maximum allowable amount of the debt: suspend performance of work, shipment of goods until the client pays the debt.

The deadline for payment under the contract has passed, but there is still no money? Submit a claim. If the document is delivered to a representative of the counterparty, require a mark of receipt on the second copy. You can send a claim by mail with the list of attachments or by courier service. Fix on paper every agreement.

Does the client ask to reschedule payments? Let him provide a letter of guarantee with a schedule of debt repayment. Correctly and timely executed documents will help you defend your position if the case comes to court.

The client does not pay, and the purchased products have not yet been sold? Calculate what is more profitable: waiting for payment or taking unsold goods back with additional shipping costs.

For convenient work with accounts receivable, the Seeneco management accounting system has a built-in service of instant B2B payments: all receipts are recorded in the system and automatically linked to previously issued invoices. You can quickly see which bills are not paid or have been paid partially in one report, and if necessary remind customers of the payments.

Results

Sometimes a crisis calls for drastic measures. The task of the businessman is to control each article of expenses, save the valuable staff resources, look for new ways of cooperation, directions of activity, and sales channels. Not the biggest business will survive all the difficulties, but the most adapted one.

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