How you do survive the worst economic downturn since the great depression? This is a big question. Many people never experienced the depression or even the big recession of 1981 and 1982. I was a controller of a large corporation back in 81-82. This got me thinking about how could I provide guidance to those who haven’t experienced such turbulence.
Based on my experiences I created a toolkit to package all the tips and techniques of how to get through the tough times. One of the key elements of the survival toolkit is developing a plan and a budget for recession survival. The toolkit contains a cash flow and budgeting template. The process of developing a plan should include an assessment of whether the business needs a tune up, a turnaround, or is in a state of crisis. When you can’t cover payroll, you’re in a crisis. This is why cash is king. If you don’t have adequate liquidity or access to cash, the chances for survival get pretty slim.
During a recession it is time to get aggressive with your sales and marketing. It isn’t always just pricing. Make sure you reach as many potential customers as possible. It’s a numbers game, and having more leads in the pipeline is crucial. Understanding your profit margins is another essential step so you can make price adjustments and at the right level to secure a greater share of the market.
The Recession Survival Toolkit outlines tips and techniques for reducing costs on every facet of the business. Just reviewing all of the potential opportunities to reduce costs is a healthy process. Usually the first step in cutting back is reduction of headcount. There are numerous ways to control payroll costs without reducing headcount. Consider adjusting hours worked or vacations with out pay as a way of keeping your valuable employees.
Another opportunity is to use lean workflow techniques and paperless systems to streamline the office and accounting functions. Not only is it cheaper, but it speeds up data retrieval, improves accuracy and saves time. It also minimizes the cost of paper and storage space.
Getting financing and having a relationship with your banker is a key element of making it through tough times. When your bank is your partner, your survival chances get a lot better. The toolkit reveals the techniques used by banks to make loan decisions. When you understand what the bank wants, you are in a better position to get the necessary financing.
Having developed a recession survival toolkit for businesses, I am now motivated to provide more guidance for individuals and retirees. I think CPAs have a responsibility to help citizens achieve a higher level of financial fitness. The AICPA and the Virginia Society of CPAs have launched a website that offers a great deal of information and advice on financial management.
Remember, it took a while for us to get in this mess, and it is going to take focus, patience, and discipline for us to get healthy again.