Is your company ready for the future?

We have been dealing with a difficult economic situation for more than a year. The economy will remain precarious over the next six months, in Belgium and in the countries around us. There is a good chance that economic growth will remain negative until the summer. The recession will be moderate nationally, but it could be more severe according to the sector. Do you want to know more about our economic forecasts? Discover our article.

With so much economic, political and business uncertainty, as an entrepreneur you should take extra measures to protect your business. It is possible that one of your major customers will encounter problems in the coming period. Avoid being unpleasantly surprised. What measures should be taken? 

The recommended supply of cash you should have reserved varies depending on who you ask, but the average suggested amount is between 6-12 months of operating expenses. There is one wrinkle to this: Money just sitting in a bank and not working for your company is a wasted resource. You will have to do some careful balancing to make sure your money is in the best place for your company.

A trade credit insurance can help tip the scales in your favor by securing your accounts receivables, making cash flow forecasting easier.
Cash will always be flowing out of your business, never fear about that, so you need to secure and protect the cash coming in to your business. Communicate often and clearly with those companies who owe you money. Make sure they are used to your billing patterns and practices. Remember, they will also face hard times when the recession hits. Weather the storm together. Remind them of how important they are to your business and vice versa. Become indispensable, so when they pick which bills to pay first, your company’s invoices are always on top of the stack. You can also maximize your cash conversion cycle by reducing Days Sales Outstanding, offering your customers early payment discounts and providing good collections practices.

Do you want to gain insight into your current liquidity? And calculate the impact if revenues, arrears or monthly costs increase/decrease?  
Always make sure your payments to creditors are on time. In fact, be early if you can and pay off your debt if possible. This will give your business a favorable behavior score. Once you have a good behavior score, it is time to push creditors for longer terms (net30 or more), discounted terms (2/10, net30 - where you save a percentage if you pay early), and even larger lines of credit. Renegotiating credit terms before there is an economic event is the best way to be prepared when things get rocky.

All kinds of cost items are negotiable. In economic downturns, rents fall, for example. Why not take advantage of that?

Renegotiate the rent of your business premises. The same goes for all kinds of other contracts, such as for cleaning, plant maintenance, office supplies, etc. Take a close look at the various cost items and consider what can be saved.
Just like your staff, you want to have just the right amount of inventory to serve your customers. If you can, talk to your suppliers and create a plan to ensure more inventory turns so your inventory never stagnates. If you have spoken to them about credit terms and made plans regarding inventory, your suppliers will see how dedicated and prepared you are to succeed.

Having a good relationship with your current (and possible future) lenders is an important step in supporting your working capital needs. These relationships also provide your company flexibility to weather any economic turbulence or capitalize on advantageous opportunities.

Ensuring your banker knows your company well and believes in your strategy is key.

You might guess one way to conserve expenses is to cut back on your marketing budget. But stop and think: How will new customers know about your company and services if you stop advertising? Continuing your advertising through adverse times projects your company as a true leader, teaches your current customers they are in good hands, and gives new companies confidence to do business with you. The return on investment to your cash flow will be brilliant.

One place to expand your business is internationally, especially if international markets are outside of the recession blast zone. Allianz Trade provides credit analysis and protection on companies all over the world, which can make stepping out on the global stage much easier.

You want to work with relationships that strengthen you. Healthy companies that, like you, are taking steps to stay ahead of the dangers of the recession. This will separate the wheat from the chaff.

We are ready to realise your business ambitions, even in economically uncertain times. We do this by:

  • Offering protection against bad debts
  • Offering assistance with credit assessments
  • Guiding you in expanding your business into new markets and territories around the world
By providing protection from unpaid invoices, offering credit evaluation assistance, and giving guidance to help you expand your business into new markets and areas of the world, Allianz Trade is ready to help your business succeed, even through a recession.

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