Lessons learned from enduring a difficult and complex business enviornment.
By Marty McGhie
During the past several months we have all listened to or read from the various “experts” regarding their thoughts on the great recession we’ve recently endured. I’ve realized, as I’m sure many of you have, that you can pretty much decide whatever you want in terms of the current economic state of affairs and then quickly find an economic expert opinion to back up your theory.
Whether you decide that we are officially home-free from the recession, still bogged down in the economic crisis, or in the worst-case scenario, heading for a deeper recession, there’s one thing we can all unanimously agree upon: Our businesses will never and can never be managed in the same way.
While riding the waves of the economic storm, I learned some important lessons that helped keep my business alive. What follows are five of the lessons I’ve learned from enduring the difficult and complex business environment we have all witnessed over the past few years.
Lessons one and two
Let’s begin with managing cash and budgeting capital acquisitions.
Lesson 1 –managing your cash: The first thing that becomes blatantly apparent during tough times is that your customers don’t actually pay you very well. And it doesn’t really matter if they are big name-brand customer – they still don’t pay you very well. To make matters worse, your vendors also are hurting, so they need their money sooner rather than later. So understanding your cash position at all times is critical.
One suggestion I have that will help here is to set up a system that tracks your cash flow daily. For example, in our business we have a daily cash report sent out from our accounting department that indicates the amount of cash that came in the day before, the amount that went out, and the current state of both accounts receivable and accounts payable, as well as significant cash obligations coming up that week such as payroll or sales taxes. Because we review the state of our finances daily, we are able to accurately track our cash flow, both in and out of the business. This report will encourage you to spend more time on collections, making sure you have a constant and consistent flow of cash into your business and will also keep you on your toes in terms of managing your cash obligations.