One thing we can be certain of is that there will be good times and there will be bad times in business. In order to weather the bad times, business managers need to have quick access to accurate financial records, so they can see the full picture.
Prepare the reports quickly
Managers will need to take immediate action and the best plans come from the help of accurate and complete reports. If something is holding up the reports, it may be best to accrue with a best guesstimate, so that the managers are not held up waiting for figures. This could be the difference between the business surviving or not.
Bad debt reserves
You may not be the only business feeling the downturn and if your customers are affected too, you may notice that payments are taking longer and longer to come in.
You MUST face the fact that these debts may not be recovered and therefore, you should ensure that the bad debt reserve is realistic.
Use the information you have at your fingertips to determine which customers are falling behind on payments due. In the tough times, good credit control is vital to ensure your obligations can be met. There are steps you can take to speed up the recovery of money owed to you, such as selling off your debts to a third party.
Keep on top of the bank reconciliations
You need to know, at all times, how much cash you have available, however this is even more important in the tough times. If money is paid out of the business and you have forgotten to enter the transaction, you may be fooled into thinking you are in a better position, than you are.
If you fail to enter an accrual expense, the profit for the period may be overstated, lulling you into a false sense of security. Accruals are generally entered as an best guesstimate based on previous invoices or a quote.
Be realistic about your stock
Stock is generally valued at 'cost' or 'net realizable value', whichever is lower. Generally, the lower of the two is cost, however, during tough times, the lower of the two is often net realizable value.
Accounts should be updated to reflect this change in valuation methodology so that the reports produced reflect an accurate and realistic picture of the situation.
Collaborate with your lenders
Approach your lenders early, if you feel you may need assistance through the tough times. They may be able to offer financial support and advice on how to best manage the business. Early intervention may save your business.