We asked: What should small business do in an economic slowdown? Eva “TaxMama” Rosenberg answered!
By Eva Rosenberg, MBA, EA
Publisher, taxmama.com, “Where Taxes are Fun!”
…Just some quick ideas before I actually wake up and start producing today’s TaxQuip.
1) There are the obvious suggestions – start analyzing your comparative financial statements to see where your costs are highest – especially compared to the last 3-5 years.
2) Look at your vendor records and see which vendors you’re ordering from on a weekly or frequent basis.
a) Are too many orders being placed, for too many things the company doesn’t need all that much? i.e. frivolous orders
b) Could placing fewer, larger orders result in discounts?
c) Are you taking advantage of 2%/10 day payment terms? Or can you negotiate those terms with your larger vendors?
d) Are you paying for too many things via credit card, where you might be able to negotiate discounts if you pay by check?
e) Can you get those products/services more cheaply? These days, those whose companies are still in good shape are in a good negotiating position.
f) Can you renegotiate shipping charges, or get them waived for larger orders?
g) Ask for discounts. A lot of companies are losing business as their customers go under. They’d rather charge you a little less, just to keep their doors open and their staff employed, while they weather out the recession.
h) Is there casual employee pilferage of supplies that either needs to be stopped or added to their wages?
i) Can you offer to trade your product/service for some of those purchases? (That would increase your reported sales and make your company look good in a time of recession; your expenses would still be the same since trades need to be booked; your net profit won’t change – but cash flow would improve.)
3) Rather than looking to cut costs, how about looking to increase income?
a) Are collectible receivables high, and averaging over 60 days, especially in today’s economy?
i) Could you sell more/produce more (hire more staff) if you were able to collect the receivables more quickly?
ii) Look into accounts receivable financing/factoring. One client I advised to do this turned $500,000 of sales into over $2.5 million in the first year. 2 years later, his sales are over $10 million because he has working capital.
b) Look at your vendors and companies with related products. Can you increase your advertising and cut advertising costs by sharing ads? For example various computer companies get advertising dollars from Intel when using the Intel inside logo. Grocery stores get rebates from vendors in order to advertise their products or to give them prime shelf space, etc.
Note: Eva is also the and author of the classic, “Small Business Taxes Made Easy,” and the new e-book, “The 100% Home-Based Business Tax Solution.”
