How to Keep Your Business a Success in Times of Economic Distress
Stay steady in a troubled economy
The novel coronavirus (COVID-19) pandemic has done severe economic damage to many U.S. businesses, and it will likely take considerable time to recover. Here are some tried-and-true suggestions to help keep your business on the right track.
Cutting back strategically
While it may seem obvious that in a faltering economy you need to curb spending, the key is scaling back in the right places. Enlist employees to help cut any expenses that don’t foster your business’s long-term success. Communicate regularly with staff about the need to curb spending and recognize employees for their cost-control measures.
Now isn’t the time to stop investing in new technologies, especially if those activities are the lifeblood of your business. When your markets may be shrinking, you need to do more, not less, to stay competitive.
Create a list of all expenses over the course of a year and separate them into three categories: “must-have,” “nice-to-have” and “don’t need.” Let your department managers provide input on which expenses should fall under each category.
Another technique: Have a check-signing “social” in which department managers are brought together (virtually if necessary) and quizzed about necessity while the owner or general manager signs vendor checks. This puts managers on notice that their spending decisions are being scrutinized, encouraging them to use more discretion when making purchases. They also might appreciate the team effort.
Teaming up with solid partners
In tough economic times, it’s important to work with suppliers, subcontractors and other business partners that are financially strong. Keep an eye on their stability. Avoid prepaying contracts, especially if a partner’s solvency is in question.
Maintaining good relationships with your suppliers is vital, so keep the conversation open and flowing with customers and vendors alike. If you’re up-front about your situation, a good supplier may even help you through these tough times by extending credit or setting up a payment plan.
Many of your customers may have difficulty paying their invoices after their businesses have been closed or partially closed due to COVID-19. One way to help move things along is to reward the “early birds” — or at least those who pay on time. Consider offering these customers a small percentage off their bills or value-added perks.
To encourage customers who’re running behind to pay sooner rather than later, consider waiving late charges if they quickly resolve outstanding balances.
Study after study shows that employees are more likely to commit fraud when they’re taking an economic hit. Asset misappropriation and theft are two of the most prevalent types of fraud.
Reduce these threats by implementing a solid system of internal accounting controls, such as segregating duties and requiring a second signature on checks over a certain amount. Also, if you’re hiring, follow sound practices, including background checks on candidates.
Don’t forget that federal and state governments are there to help. Taking advantage of tax incentives, deductions, credits and low-interest or forgivable loans is one of the quickest ways to positively impact your company’s bottom line. Contact our tax professionals at (973) 298-8500 to ensure you don’t miss any valuable money-saving opportunities.