During a credit crunch small companies are generally better able to survive.
Why? Because small companies are fleeter of foot, they can change direction quicker and they are closer to their markets. But they will still have cash flow problems. They have to be very careful as larger companies will always try to squeeze them and take advantage of the smaller companies' cash flow.
Is there a golden rule to get small businesses through this difficult period of business?
There is, it is "Keep in touch".
We need to keep in touch with our customers, our suppliers and our bank.
We need to remember that we are both a Debtor and a Creditor
As an example how often has one of your debtors rang, without any prompting, to tell you they have a problem and can't pay you? I bet, not very often. What is your reply? Usually something along the lines "Thank you for letting me know", and then you give them more time. Why because you debtor is "Keeping in touch".
The really successful small businesses make friends of their suppliers. For example, Charles Dunstone, who built Carphone Warehouse from one shop to a billion pound business, says: "You have to be a good partner to your supplier. Starting up I think that was the greatest lesson I learnt. We basically funded our business by using our suppliers' cash flow in terms that we sold goods before we had to pay for them." He went on to say "suppliers are the cheapest working capital you'll
ever get", and he's now a billionaire!
So next time you have a problem paying your suppliers give them a ring, but make sure that you ring them early, not when they are threatening you, because this is too late.
Taken from Cash Management by Tony Dalton
Published by A & C Black
ISBN 978-0-7136-7706-5
If you feel that Tony may be able to help your company, or you know of one who could please contact Tony on 01926 855920 or 07976 707479 or email tony@think-cash.co.uk
For more tips, buy the book!
