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Managing through an economic downturn

Managing through an economic downturn

Local insight.

Forecasting

A business that is able to accurately forecast its cash requirements will have greater management flexibility when decisions are being made that require financing. For example:

• Capital expenditure can be deferred until adequate cash resources are available; • Discretionary spending can be identified, deferred or frozen; • Facility limits may be reduced, saving on line-fees and/or interest.

Future planning

Business managers and owners should keep in constant communication with suppliers to help understand how their business is travelling. Develop a contingency plan for key suppliers on how to obtain supply of goods or services should that supplier fail. Do the changed trading circumstances offer alternative suppliers at better rates?

While every business is different, they can all benefit from a critical look at their cashflow cycle. When lenders make financing decisions in the current credit environment, they are placing a greater emphasis on a business’ ability to manage their cashflow effectively. When new finance is required, a business will find that lenders are more receptive to proposals that demonstrate robust business plans and forecasts.

Andrew Needham is a director in the business recovery division of accountants and business advisers, HLB Mann Judd Sydney. aneedham@hlbnsw.com.au


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