How to reduce the risks in a tough economy
 
 
 

How to reduce the risks in a tough economy

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Control means more than just following revenues and comparing them with the budget. There are many events and situations that could affect your organisation. That's something we are very aware of these days with a recession and higher interest rates. With the following steps, you are more prepared to handle unforeseen events, and you reduce risks and increase your peace of mind.

Here are a few tips on measures that will make you better prepared:

Create rolling forecasts

A lot can happen during the year to affect the annual budget you set at the beginning of the year. To keep abreast and be updated you need to make ongoing corrections to keep the budget relevant. Depending on the industry in which you operate, you should produce a forecast for your most important business ratios every other, every third or every fourth month. This gives you better control and enables you to correct and implement measures in time should anything happen.

Keep your cash flow in check 

Continually make liquidity forecasts to ensure that the company’s funds cover upcoming pay, investments and unforeseen charges, for example. This is a good way of avoiding unpleasant surprises and making sure you have capital when you need it.

Improve your liquidity

Set out to improve your liquidity – for example, by getting clients to pay as early as possible, in advance or at the time of purchase at the latest. If you invoice clients, issue your invoices as soon as possible and specify payment within 10 or 14 days. Send a reminder as soon as an invoice falls due for payment. Find a simple debt collection or factoring solution for non-paying clients. The opposite is true for supplier invoices – obviously you want to pay them as late as possible. 

For more tips on liquidity planning, please also read this article

Review your costs and purchases

If a company has a 10% profit margin, a saving of one SEK is worth the same as a 10 SEK increase in turnover. Share costs (offices, materials etc.) with others where possible. Buy through purchasing portals which offer excellent discounts for members. If you have stock, make sure that it matches your product turnover so that you are not waiting a long time for money.

Higher margin on profitable products

Are your offerings priced correctly? Review which products and services sell the best and analyse whether you can raise prices for these. An increased margin has an immediate impact on the bottom line! 

Develop existing clients

It is easier to get an existing client to buy more than to find a brand new client. So how can you add more value to your product or service to broaden your market? Make sure it is easy for clients to do business with you. Maintain contact and always answer questions immediately, even if it is just to say you will get back to them. Make the client feel that their voice is heard. Often, the reason why clients leave suppliers is not price, but poor service. 

 

Find twin clients

Find out which of your clients are the most profitable and focus on finding more of that type of client. Find out what your dream client looks like by identifying the common denominators among your best clients. 

 

Be prepared for the worst

What makes your business stand or fall? What would happen... If a supplier’s factory went up in flames and you were unable to source materials for production? If a scandal was revealed in your industry and no one wanted to handle this type of product any longer? If a competitor offering the same service suddenly did so for half the price? Stay informed about the industry, your competitors and the business landscape, and make sure that you have a contingency plan for what to do.

Ask for help

Does your company have the right skills? Growth places higher demands on skills in many parts of the business. Should you employ more people or ask for help? Don’t do things you don’t have the expertise for because the results won’t be good and you’ll probably spend far too much time on them.

Feel free to contact us at Azets if you have any questions or comments on how you can develop and help your business to grow!

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