1)
Don’t buy more raw materials inventory than
you need.
In fact, reducing your
inventory stores is an excellent strategy in any economic condition.
Return inventory that you
don’t need. Sell, for less than you paid if necessary, any inventory
that you don’t need and can’t return. Cash in the bank is more useful
than worthless parts taking up space in your facility.
2)
Eliminate obsolete finished-goods inventory
that won’t sell for what it cost you to produce.
Some owners think that
dealing with obsolete inventory takes valuable time away from their
business operations. On the contrary, keeping obsolete inventory is a
huge waste. If it is truly obsolete, then its value is not what it cost
you. Its value is $0. When your CPA discovers that your inventory is
obsolete, he has an obligation to write it off, which may hit your
bottom line hard.
While its value is zero,
you may think that it doesn’t cost you anything just sitting there in
the warehouse. But it’s actually costing you big! It wastes precious
warehouse space and utilities. It wastes time for your workers to move
around it. And it costs to count it at physical inventory time.
Reduce the extent of the
write-off and the worker inefficiency by continuously selling off
inventory that becomes obsolete. You will get quick cash, free up your
warehouse space, and take less of a hit at inventory-counting time.
3)
Don’t build up finished-goods inventory.
One of the biggest mistakes
that small business owners make is to ‘get ready for more sales’ by
continuing to manufacture, at the same high rate, product for sale when
it is selling more slowly. This mistake is a cash flow sponge that can
soak up all of your cash reserves at a time when you need them the most.
4)
Don’t try to ride it out with your
employees.
When your labor force runs
out of work, send them home early. Give them their choice of two days
off in the next month, without pay. When you trim your labor base early
in a downturn, it is more likely that your employees will be able to
find other work. Your business will remain stronger, and may be able to
rehire them sooner. You must remain as efficient as possible to protect
your family and be able to provide for the families of the workers whom
you retain.
5)
Send outdated invoices that your
customers won’t pay, to a collection agency.
Getting half now is better than nothing
later when your customers have filed for protection. Audit your
receivables. Make sure that all of your customers have each invoice they
owe you and that your collections department has some leeway to
aggressively collect your money. The further down that a shaky economy
takes us, the more difficult it is to collect.
The best part is that once
you’ve ridden out a downturn and become accustomed to these management
behaviors, you can continue to do business this way, and you’ll see
higher profits when times are good.
About the Author:
Sue Canyon is a leading
small business analyst and advisor who can protect and grow your
business by unlocking management mysteries that plague small business
owners during times of economic uncertainty. Now, with Sue’s FREE
“Quick Starter for Cash Flow” 5-day mini e-course, you can discover more
ways to release cash that’s literally hidden within your business. Get
it now at:
http://www.businessbooming.com
