Kevin Ryan | Money Tips

kevin-ryan-citrin-cooperman_8-cropped.jpgTop 10 Tips For Surviving an Economic Downturn

Kevin Ryan, CPA
Partner
Citrin Cooperman
Philadelphia

Many Citrin Cooperman clients are noticing a growing concern among their customers, and consequently, are beginning to prepare for tougher times.

Our clients are asking us what they should be doing now to prepare for an economy that goes south. As CPAs, we’re always worried about volatility in the marketplace, so the advice we provide now is the advice we’ve provided to businesses all along. Look at 9/11. Many companies weren’t prepared when the economy sank then, and frankly, many companies didn’t make it.

There are steps owners of privately held businesses can take now to prepare for a sluggish economy. They include:

1. Review your budget on a monthly basis. Keeping track of expenses, sales, margins, cash flow and other indicators allows business owners to make informed decisions in an economy that can be shifting relatively quickly.

2. Watch receivables closely. They can be an indicator of how hard a business’ clients are being hit by an economic downturn, and could provide an early warning that clients are about to cut back on their purchasing.

3. Evaluate all expenses. In a strong economy, business owners may neglect to review - or re-price - the services and supplies they purchase. Review the services to see which ones are no longer needed, and research prices and offerings from different vendors to see if there are cost-effective alternatives.

4. Ensure cash flow remains healthy by matching account receivables to accounts payables. Review and revise processes for collecting payments, and get more aggressive with reminders and phone calls when payments are late.

5. Offer credit card payment options to slow-paying customers. Swallowing a 1.5 percent processing fee to the credit card companies is a small price to pay for having the cash on hand to operate your business.

6. Take advantage of services offered by your bank. Services such as “sweep accounts” push money in an interest-bearing account from a business’ checking account each night, and “sweeps” it back into the checking account in the morning, when funds are needed.

7. Refinance debt. As the economy slumps, the Federal Reserve has lowered interest rates. With interest rates low, entrepreneurs may want to refinance debt, or turn their line of credit into a principle and interest loan in order to pay down debt.

8. Negotiate with vendors. Many vendors will provide a discount for payment up front. Others will provide discounts to loyal and longtime customers. If cash flow is an issue, request an extension of credit with them, so that your business can pay invoices in 60 days, instead of 30.

9. Begin accumulating a cash reserve. Similar to a personal “nest egg,” a business’ cash reserve can be used for emergencies such as a recession, or for special occasions, such as an opportunity to acquire another company. While profits should be used to grow the business and to reward owners and employees, make sure a percentage is reserved for later use.

10. Expand services. This may seem counterintuitive, but if a business is financially healthy, it may be able to expand services to take advantage of cutbacks being made by competitors which are struggling.

As a partner with over 20 years of experience, Kevin provides audit, tax and business consulting services to clients in a variety of fields, with a special emphasis in the hospitality industry. His clients include bars and restaurants as well as companies in the food and beverage industry. Kevin is also an expert in the not-for profit sector, providing audit services to a number of charter schools in the Philadelphia area. He is on both the national and local board of directors of the Leukemia and Lymphoma Society where he serves on a variety of committees and as Vice-Chairman of the National Audit Committee. He has also sat on other various not-for-profit boards over the years. Kevin has also served as an adjunct professor at The Restaurant School at Walnut Hill College. Kevin earned a bachelor’s degree in accounting from Temple University. He is a licensed CPA in Pennsylvania and is a member of the PICPA.

Posted at June 10, 2008
Filed Under BSG [CPA TRENDLINES] |

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