1. Ask for payment. It’s surprising how many people don’t actually ask for the money.

2. Have a written contract — your Terms of Trade — in place.

3. Use a third party for the right reasons. Your third party should be a normal part of your debtor management process rather than the collection means of last resort.

4. Take action early. When an account comes overdue move your company up the debtor’s priority list. The squeakiest wheel gets the most oil.

5. Always ask for a full name when you first sign up a new client. We recommend you have some sort of form to capture these details.

You are unable to list debtors as defaulters unless a full name is given. If you don’t have a full name, it turns the big stick of the threat of an adverse credit rating into an ineffective twig.

Professional, unethical debtors are aware of listing requirements and will take full advantage of the fact that their full names are not known.

6. Use your diary or electronic calendar in Outlook to remind yourself to follow upon payments.

7. Register your interest in goods you sell on the Personal Properties Securities Register.

8. Keep records of debtor contacts. Whilst they need to be persistently and consistently recorded they don’t need to be flash and fancy. They should be simple and practical enough for you to use every day.

Remind your staff that they are sales people and not checkout operators – they need to encourage the customer to part with their money.

The easiest way to do this is to teach your staff about the McDonalds way: would you like fries with that? would you like to upsize your order? Add on sales are easy to make – and when the customer has their hand on their wallet they are at their most vulnerable! The worst case scenario….the customer may decline – the best case scenario……it’s not rocket science! Imagine how much extra McDonalds take just for making a simple suggestion. Teach your staff what add on sales might work:

“those trousers look perfect on you…..and this belt will just finish the look off nicely”.

“that lipstick suits you……what do you think of this matching nail polish?”.

“here is that paper you were looking for….did you know that it’s cheaper to buy it buy the box full?”

“This product is available in 2 sizes…..the larger size is more economical to buy”.

If your system allows, monitor the number of sales each salesperson makes and how many items comprise each sale. Use this information regularly to let them know how they are doing, and that you are watching them! Incentivise them each month to improve on the previous month.

We all know that keeping a customer is easier, and more cost effective then spending on publicity to find new ones. So I use the down time to pamper my current customers. Inquiring about their own situation, reconnecting with points of contact, etc.

When new customers fail to materialize, I focus on my current customers. I am in an extraordinary position to know and analyze their needs. I get proactive, and try to find ways to sell them my services in a way that will help them get through their own hard time. At times surprising them with skills they may not know I had. Often times, your customers may not know the full array of services that you can offer. That gets me more work, but also shows them that I care and am concerned with their own struggle to get through tough times. If I identified a need and it’s a job that I can’t do, I’ll research for them who could do it, and I might recommend someone I know and can vouch for. There is a bond there, and trust, and both are nurtured.

When business is not as busy, and once I’ve done all my homework (advertising, marketing, networking, and other key ‘ings’), I see free time as a blessing, not a curse. I use free time to :
- get on top of things (all those pesky chores and tasks that are constantly postponed when you are busy and are a one person operation).
- catch up on trade magazines or websites, blogs;
- researching issues in specific fields that are of interest to me;
- brush up on some laws that affect my business;
- research my customers (they may have branched out in other things and I was not aware of that);
- explore features of software that I use often, so I can get more productive when I am working and under pressure;
- find new ways to streamline my operations;
- revisit all existing material (forms for bids, contracts, fliers, etc.);
- educate myself about areas I may not be as competent as I wish I was;
- go through your virtual rolodex : purge, update, and renew contact;
And in the end, it all contributes to improving the quality of the services I render.

Recession has already had a serious impact on my business. But by having made my business as lean as possible, keeping overhead to the very lowest, I am hopeful I will ride this wave, and I feel energized by the fact that I have TIME to do all the stuff I never have time for. I use that spare time not for extra leisure time. Nop. All that time is used with in mind to improve my overall future performance as a consultant. I truly see this as an opportunity for strategic repositioning, and finding new directions.
Good luck to everyone. And thank you Xero team for this post in your blog. I got some great tips from previous replies.

Visit our website: http://www.xuru.co.nz for more tips on Xero and the opportunity to add your own comments and ask questions.

1. If you aren’t on Xero, then change sooner rather than later! Xero will provide greater visibility on the business and will allow all Directors to stay in touch with the company finances.
2. Stay positive and focus on growth or innovation. During times like these we need to have ideas and use staff and key contacts to offer suggestions and leads.
3. Get sustainable! Sustainability is a huge growth industry and will continue to grow and offer opportunities despite the economic outlook.

1. Retain the right people.

People are still the most important component of your business. The right people tasked with the right challenges will add value to your organisation today, and ensure that you are in the best position to take advantages of the opportunities that will present themselves in 2009.

2. Reduce non-essential people costs.

Generally we all need to tighten our belts in tougher times. The money spent on people also needs to rationalised. Re-examine your spending on contractors, recruitment, offsite facilities, and at risk remuneration. It is essential that every dollar spent on people is spent effectively and adds value to your organisation.

3. Prepare your people for change.

Economic volatility is often a catalyst for companies to restructure, down size, merge or expand. Ensure you have a solid communication strategy to enable a smooth and supportive transition. Create a resourcing plan so that staff communications are clear and consistent.

4. Complete in-house projects that have been lying around unfinished

Projects that create long term value are often pushed aside for projects with an important, but short term focus. Did you hold focus groups after your last staff engagement survey, and address the issues raised in an effective and enduring way? You now have that opportunity to tie up those loose ends.

5. Plan for the future with your people

Set your HR strategy in place now. A strategic HR plan should be looking 3-5 years in advance of the business. What do you need to establish now so that you can achieve your strategic objectives. One cliché that comes to mind is ‘getting horses in the race’ so that you are creating options for your business.

We hope this helps, and that your firm and your people not only survive, but prosper in 2009!

Victoria Clark
HR Incorporated Limited
http://www.hrinc.co.nz

Another area to focus on is creating an environment where new opportunities can be taken advantage of.

But in order to be well-positioned in both respects, one also needs to be uncommonly effective right now when to comes to cash management. Just as banks are tightening their terms and conditions around lending facilities, so should businesses be tightening the way they go about administering their own lines of credit.

Obviously, then, the more cash one extracts from operating a business, the better one is positioned for deal with any trading difficulties, or indeed to seize new opportunities for expansion. But how does one stay on top of it?

In order to ensure you’re in charge of the situation, it’s probably never been so vital to maintain a cash flow forecast. Ideally, this should be updated on a daily basis, projecting out at least 90 days. Once a company has been working with the model for a short period, however, it needs to be projected out for the full coming 12 months. Though this will not guarantee the cash outcomes, it will provide a reliable indication of cash trends over the coming turbulent months.

Based on this information, one can plan, and implement, changes that may reduce or delay the cash outflow while improving the cash inflow.

Where surpluses are achievable, the trick is to take this cash and create a buffer that can then be drawn on if the business starts to experience a few hits.

Even if the picture starts to look bleaker than that — if the data point to an unhappier outcome should all the predicted negative impacts occur — this exercise at least allows one to plan for a worst-case scenario in which you won’t lose the shirt off your back.

Here are some other pointers for enhancing that all-important cash flow:

Active debtor management. When you take on a client, ensure the terms of trade include payment terms. Make sure you include a clause that allows you to add the costs of collection to the outstanding debt. And follow up debtors promptly after the due date. Most businesses with cash flow issues, in my experience, tend to have old debtors who have not been satisfactorily chased for payment.

Retain key staff. This may sound almost counterintuitive in tough trading times. Actually, not. It costs more, not less, to replace crucial staff members. Studies suggest that the cost to your business in taking this course could be at least the equivalent to one full year of the employee’s salary.

Review all existing costs. Do these outlays produce revenue — which is to say, cash — for the business? Look for scenarios that will allow you to reduce costs quickly if there is a sudden dip in sales.

Know your margins. Really know them. It’s only through understanding the costs required to deliver your goods and services, after all, that you are able to validate the operation. One also needs to be mindful here of overheads that aren’t directly related to the specific production of those activities. Refocusing the business accordingly will increase its efficiency.

Among the other issues to be considering right now is the improving exchange rate and its possible benefits for new exporting. This is an area that needs thorough planning and preparation, of course, but not underestimating the effort involved shouldn’t be an excuse for not striking if the iron looks hot. Here again careful cash planning is essential to any success.

As a business owner, one needs to have the correct legal structures in place to ensure one has protected as much wealth as possible. Yes, this could mean additional costs — in the short term. But the protection afforded by using the appropriate structures has never been more applicable than in the current environment.

Dark clouds, silver linings. It comes down to this. Understand the cash drivers. Work to maximise the outcomes that enhance your business.

*Ensure you are getting value from what you are paying for.
Is your website easy to navigate? Does it load quickly. Does it deliver what you want it to. If not talk to your provider or find another provider that you can trust.
Talk to someone in the know to make sure your mobiles are on the best plan for your business.
Make sure your computer network is doing what it should. If your computer is running slow then a simple memory upgrade does wonders.

*Good use of time is essential.
Using functionality that Xero provides like repeating invoices, or the various services provided by the Xero Network ensures that time spent doing data entry is kept to a minimum, so you can focus on the more important tasks like running your business.
Often investing a wee bit of money into a solid system saves you a lot of time down the track, and makes your life easier and less stressful.

*Follow up straight away on unpaid invoices.
Sent a statement via email and give customers a phone call 5mins later to ensure they get it. The personal touch reminds them they need to get you paid, and makes you stand out from the rest of the pile of invoices.

*Don’t hesitate to ask for help, or a second opinion.
If you’re unhappy with the services you are paying for, talk to your provider, or approach someone else providing those services. A smaller company will often give you a more personal and tailored service.

1) Embrace advice – get yourself an advisory board. NZTE will help fund them and they’re absolutely one of the most valuable things you can do

2) Set your own personal goals. Until you do that you have no way of knowing if your business goals are aligned with where you personally want to be

3) Once you’ve set personal goals grab your advisers and get away from the business – think about what your business does, its core competencies and weaknesses and its realistic potential. Then decide on 3-5 high level strategies for getting t where you want to be

4) Sweat the small stuff – details matter, a $100 creditor may be small in the scheme of things but $100 may just be the difference between sink and swim. Don’t pass off your responsibility to others – as a business owner you have an obligation to understand accounting, tax, law etc etc. Tools like Xero help, but they’re tools and don’t replace an understanding of the basics

5) Don’t sweat the big stuff – shit happens, accept it. Being in business has stresses and sometimes the unavoidable will happen. If every major setback made you want to leap off the nearest cliff they’d be few people left and no businesses. Life’s too short to blow business problems way out of proportion.

And seeing that others have taken the opportunity to push their own gig – check out http://www.bizchat.co.nz an online community for small businesses in New Zealand – a place to ask questions, get advice, find information and generally have conversations with your fellow business people.

Your competition is also having a rough time. Take advantage of that. Use their weakness to lure away their customers with something better.

Be inventive. Offer new products/services or create new packages from existing products/services. Having something new to offer as an excuse to get in front of people and generate some buzz.

Adapt quicker by listening more closely to your customers. Listening serves many purposes – it gives you a good reason to get in touch with many people, you learn a lot, and you demonstrate that you’re taking care of your customers. Help your customers succeed. Their success is your success.

Every business selling valuable goods should consider having a ‘retention of title’ clause contained in their contract terms, as well as taking legal advice to ensure that the clause remains current and enforceable, and the level of cover it provides is suitable to the circumstances. Essentially the clause must clearly state that the seller remains the legal owner of the goods until paid for.

A ‘retention of title’ clause is therefore an essential part of a sale of goods contract. The clause is normally designed to delay the transfer of ownership of goods to the buyer until full payment has been made (or some other crystallising event specified has occurred). Whether such a clause is practical also depends on whether the goods in question can be clearly marked and identifiable as the seller’s.

This clause works by granting additional protection to the seller as, should the buyer experience financial difficulties (a liquidator, receiver or administrator has been appointed), the seller will rank above the secured and unsecured creditors who would otherwise be paid out ahead of the seller. Importantly, any delay in enforcing your rights under a ‘retention of title’ clause may mean you still end up as an unsecured creditor – at the bottom of the pecking order when payments are eventually made.

This protection can be extended or strengthened by, for example, providing the seller with a right of entry to the buyer’s premises and granting him the right to seize goods (even including detaching them from a manufactured item in certain circumstances).

The ‘retention of title’ clause should also, for example, ensure the buyer is liable in the event of accidental loss or damage to goods, though the seller still retains title. Normally goods remain at the seller’s risk until title passes to the buyer. However, as the seller relinquishes control (but not ownership) of the goods, it should be clearly stated that such risk will pass to the buyer on delivery.

The law on retention of title is continually evolving and it is important to ensure the contract terms are regularly reviewed to ensure they can be enforced and that they provide the protection needed in the current climate.

Always take legal advice when drafting or enforcing a ‘retention of title’ clause.

1) How have I done this year?
2) What can I do better?
3) Where do I want the business to be in a years time?

Talk to friends, family, colleagues about it. Use the time wisely to get some high level thinking done that you don’t otherwise have time for.

Good luck for the coming year…

2. Online Backups are easy
Backing up your computer is obviously important. But regularly changing the backup drive (or USB Thumb Drive) can be a pain. Having your important documents backed up on a schedule to Online Storage is both easy and cheap. (Call 0800 GETITHERE, press 2 for Jamie, and we can set it up over the phone).

3. Lease your computer equipment; don’t buy it!
Your working capital, and cash-flow is important. You can lease any computer equipment, including servers, laptops, desktops and cell phones.
It takes around 10 minutes to get finance approved, and you can have your new hardware, your Microsoft Office, all the setup done, backups, antivirus, and then split it over a 24 or 36 month lease. It makes it very affordable, and when the lease is up, you can replace your equipment with new gear for the same price, or buy the equipment.

4. The right printer can make your small business look BIG
There IS a big difference between the printers you can get from places like Harvey Norman, and Dick Smith, and Business Level Resellers (like Get IT Here Ltd). A good quality, networked colour laserjet printer can’t be purchased for less than $1000 dollars, but they make a huge difference in the quality and presentation of documents. And the economy is obvious, our printer has printed over 13,000 colour pages for presentations, and still hasn’t had its toner cartridges changed.

5. Throw away your CRT Screens(The Big old monitors)
Those big screens you got with your older computers actually cost you in electricity bills each year, what a new LCD monitor costs to buy new. Eg: a basic 19″ widescreen is under 300 dollars.

Computers are designed to make our lives easier, they make my life easier. We can have them make your life easier too.

Jamie

Most importantly, understand what your customers want an tell them what you are doing. The cost of acquiring a customer may be higher when there are fewer potential targets in the market but if you stop marketing even your loyal customers will forget about you.

Leverage every touch-point to communicate and cross sell. There is no better time to get good marketing practices in place than during an economic downturn. When an uptick occurs that will pay off.

Be brave and keep moving; animals caught in the headlights end up as road kill.

Read my full article on this at http://www.workingthree.com/articles/

1. Cash. Lack of cash flow kills more businesses than any other problem, so focus on preserving cash as much as possible. Reduce or delay forecasted expenditure and examine other overheads to see what savings can be made.

2. Debtors. Get tough on debtors. Put a well documented credit control process in place, get customers to sign terms of payment and stick to the system consistently

3. Inventory. Aim to reduce inventory days down by liquidating slow moving items and working to a tighter re-order time. Don’t be attracted to buy bigger lots from reps unless there is a BIG saving.

4. Don’t reduce your marketing. In fact increase it. This doesn’t necessarily mean spend more on advertising. There are plenty of low cost ways to increase inquiries. They just take a bit of time and effort.

5. Look after your existing customers. These are your like blood and produce revenue for you at MUCH lower cost than looking for new ones. Focus on providing superior customer service and enhancing your offering to your key clients.

Good luck in 2009 and talk to us at Icon for for business building ideas

This includes, and in a particular order of relevance:
- The people who are part of your business. This isnt necessarily limited to employees, because many of the businesses in NZ are in the “0-1″ employee bracket.
The People include: your employees if you have any; your support network, mainly your wonderful family and friends; your suppliers; and your banker(s).
- The people to whom your goods and/or services are delivered. This is not only your customers, but it includes their customers too.
- The greater community in which you operate. This includes not only your workplace neighbours, but the business community around you – most of whom are distinctly and blissfully unaware of your existence.

How do you manage all these people, especially given the degrees of separation between you all?

Start by surrounding yourself with the best people you can, and do what you can to keep them with you. No, this doesnt just mean your employees, however these are the among the most important.
Finding, including and keeping the right people for and in your business is no simple task and should not be taken lightly.

The average small business operator doesnt have the time, or really the wherewithal to be able to effectively recruit the right people for their business.

When it comes down to it, does your average small business operator have the skills to effectively create and manage a relationship with a supplier – that is advantageous to their business not just the suppliers?

Dont be afraid to acknowledge that the skills needed to find the right people – employees, suppliers, customers – to be part of the business arent necessarily inside your business.

Help is available and it is a worthwhile investment to release your time back into your business while someone else helps you in non-core areas.

Most of you would readily pay your accountant to do your books, your lawyer to draft your contracts, but wouldnt engage a skilled expert to help with your business relationships. Maybe someone else here can answer – Why?

Get rid of your bank overdraft, as quickly as you can. Make your business earn more profit and use it first to get rid of your overdraft.

The problem with bank overdraft is that most small business owners use it to cover up problems with the stewardship of their businesses that should never exist in the first place. Their customers are not paying on time, they’re not sensibly managing their overheads and stock levels etc. If they cleaned this up, then the only need for borrowings would be to boost cash flows while sales are grown to a level that generates enough profit to pay the owner, pay taxes and pay all the other bills.

To be fair, most of the start-up businesses that I’ve seen start with that in mind. However as profitability increases most take the pressure off their debtors, they loosen the reins on overheads and increase stock levels. Then, because they are people, they adjust their lifestyle. Before long, the overdraft becomes a permanent part of the business Balance Sheet.

When I worked as an Accountant, I could intellectualise and philosophise for hours on the benefits of using the bank’s money. However I’ve since found that there are very few people in this world who have the discipline to properly use the potential that bank overdraft creates.

The small number of business owners that drive themselves to repay their overdraft, and then cash flow their businesses organically, are invariably the ones that accumulate the greatest wealth and stability over time.

DISCIPLINED cash management is the difference between survival and collapse for companies facing a recession, warns Clarity Business Financials.

Bournemouth-based Clarity’s Managing Director Sue Baker outlines her ‘Baker’s Dozen’ tips to help ensure your business stays afloat in tough times.

Tip 1 – Don’t Delegate Your Cashflow Strategy

Delegate your financial work but not your strategy. Stay involved – do not let others take important cashflow policy decisions for you.

Tip 2 – Keep Your Terms Tight

Don’t adopt 30-day payment terms just because everyone else does: Revisit your Terms & Conditions. If you say ‘my terms are seven days’, then they are.

Get it right from the start. Decide your policy and stick to it. Be nice but be firm – you will get respect for it.

Tip 3 – Consider Credit Insurance

Remember that credit checks access only out of date information and that trade references are not really worth the effort. Credit insurance can cost as little as 0.5 per cent of your sales.

Credit insurance forces you to adopt best practice and also makes it easier to ask for money in advance: “My insurer won’t cover you – I need you to pay in advance.”

Tip 4 – Don’t Offer Discounts For Early Payment

Offering discounts sounds like a great idea but it’s a lot of hassle. You won’t get paid any earlier and your debtors will still claim the discount.

Tip 5 – Maintain Effective Credit Control

You catch more wasps with honey: Build relationships with customers. If they like you, they are more likely to pay you on time.

If they are slow to pay, be friendly but don’t stop calling them.

You need a clear escalation policy. Have a strict system and stick to it. If your debtors know you are firm and organised they will pay you first.

Never apologise for demanding payment. It’s your money.

Tip 6 – Engage The Sales Team

The sales team should always know the position with regard to credit control.
Involve them emotionally by not paying them their commission until you’ve been paid.

Tip 7 – Shorten The Cycle

Chart how long it takes from you first incurring costs to finally clearing payment from your customer.

Identify any hidden delays and remove them:
• Can you shorten your production process? Check your ‘just in time’ procedures.
• Do you send out invoices on the first day possible? Don’t post them – email them.

Tip 8 – Smooth The Month

Is there a pattern to your months? Are some weeks either feast or famine?

Smooth your cashflow during any given month by changing payment dates.

Ensure you get paid by Direct Debit wherever possible but avoid paying your suppliers by DD so that you stay in control.

Tip 9 – Daily Cash Report

Know your cash position every day.

Don’t simply pay first those who shout the loudest. Prioritise your payments:
• Priority 1 – individuals/one-man bands. Don’t mess them around. Their livelihoods are at stake.
• Priority 2 – critical suppliers. You need these people.
• Priority 3 – local suppliers. Look after your local firms.
• Priority 4 – national/international firms.

Never delay paying HM Revenue & Customs.

Tip 10 – Avoid Knee Jerk Reactions

Cut waste by trimming the fat, not the muscle. Do not cut spend that is focused on generating future sales.

Consider outsourcing rather than employing. It may be more expensive initially but you can very, very quickly resize your organisation up or down. This is an essential recession-proofing strategy.

Tip 11 – Accurate Forecasting

Maintain a six- to eight-week rolling forecast. Update it weekly at the very least.

Have early indicators in your sales pipeline to pick up any problems early on.

Tip 12 – Be Aware Of All Options

Overdrafts are not the only way to raise working capital – the banks can call them in at any time. Consider invoice financing or talking to a corporate broker for other options.

Also, directors’ loans are an option. You can pay yourself interest at a better rate than the building societies offer if the risk is higher.

Tip 13 – Know Your 12-Month Needs

If you want to be really in control, always have a 12-month view.
If you can see a funding need coming up in six to nine months, start talking to people about it now. It takes time to put in place.

Sue Baker
http://www.claritybusinessfinancials.co.uk

A recession is economic Darwininism at work. By *choosing* to be leaner, smarter, hungrier and more determined than your competition you can be assured a larger slice of your market when the recession draws to an inevitable close. This will happen, but the only question that matters is this: will you be around to collect the spoils of an increased relative footprint, or will your competitors be launched by your demise?

If you want to be there when conditions improve you will need to consistently plan, execute, innovate and achieve where others flounder, stall, repeat and fail. The choice is yours.

1. Cashflow is king in tight times. Create a cashflow document to make sure during the holidays the business has enough cash to pay.

2. Give away perceived value such as a warranty for 7 day payment.

3. Have someone responsible for cash and accounts receivable. Track every contact and payment details in a database or accounting package. Use log in Xero to keep track of this. Contact as soon as possible for payment. Money greater than 90 days is unlikley to pay

4. Get invoices out as soon as the sale is made. Better to invoice out prior to the 20th of December so that as much money can be received during your downtime as possible and allows you to get everytihng invoiced by the end of the month.

5. set a date for all accounts payable invoice payments. Any bills sent after your cut off date can then be paid the month following.

6. plus —- go to our website and sign up for our monthly newsletter outlining tips and tricks each month on all areas of your business. No downloading as it takes you to the site. http://www.iconbusinesssolutions.co.nz/cms/index.php?page=subscribe-to-newsletter

Happy holidays and good times in your business. You deserve a break