The best time for recession planning is before it gets bad.  It should have been done already!  But it's still not too late to set up your financial defenses.  If you haven't yet made concrete plans for your business, there is no time like the present to get started. 
 

How do you know when things are going to bet tough? What does a recession look like? What signs, subtle or dramatic, do you look for? Who knows for sure when we are in a recession? Economists disagree on the signs and their interpretation.

Are we truly in a recession?  Probably.  A harsh downturn?  Absolutely!    It's been said that if you ask ten economists, you will get ten different answers...It's also been stated that economists are so undependable that they've predicted 10 of the last 3 recessions!  Clearly though, it's starting to sound, look and feel like one.  But if you need a more tangible barometer of the current economic conditions, you can take a walk through the local shopping mall on a Saturday afternoon...many are starting to look like ghost towns!  Or you can ask the management of G.M. and Ford if they feel a recession?

In any business, Cash is King. You need to preserve and secure it now.
 
What can businesses anticipate as the recession unfolds?  We already have seen the effect on the housing market and the auto industry.  Consumer spending will decline as jobs start getting cut and access to consumer credit starts to tighten. Large retailers will fail.  Small business will lose access to short term credit and will have to operate more on a cash basis.  Most all businesses, regardless of size, will attempt to hoard cash by paying their debts and invoices in even slower fashion.
 
So what steps should you be taking to "Recession Proof" your business?  Here's the short list:

1.     Become Pro-Active in running your business.
 
2.     As quickly as possible reduce or retire your business debt!
 
3.     Cut business expenses as far as you can without affecting sales.
 
4.     Review the credit status of your customers and their credit terms.
 
5.     Reassess your market and stay in close contact with your customers.
 
6.     Keep your business as liquid as possible.
 
7.     Make sure your business is performing at maximum positive cash-flow.
 
8.     Aggressively move to collect your accounts receivable.
 
Let's discuss one of the biggest business killers in a recession, or at any time...Negative Cash Flow!

As mentioned, during recessionary times your customers will take even longer to pay you. Some of your customers may even file for bankruptcy and leave you with non-collectable invoices. Simultaneously, your suppliers will feel the pinch and begin to limit or even cancel your trade credit limits. Your revenues may drop off as consumers and commercial accounts begin to hunker down.  And to top it off, your bank will be tempted to freeze or limit your existing line of credit. Yes, they can, and have, done it! We have seen it happen to a company that was making its payment obligations! Un-fair? You can bank on it. Talk about a perfect financial storm!  
 
All of a sudden, you'll realize your cash flow is negative...cash out exceeds cash in...and your business' solvency may be in question.  You know you are running an annual net profit, but this month you can't pay your taxes and your salaries. Instead, by slow-paying you, your customers are using your money to pay their expenses. You just became a non-profit finance company. You'll still need to make payroll. You'll still need to pay taxes.  Whose money will you use?

Use yours! It's your money, use it when you need it!  Here's how.

Obviously, it's always important to run your business with positive cash flow, but it is absolutely critical in a recession!  Your margins for error are greatly diminished in times like these. Did you know you have a pro-active resource available that can put your company into a positive cash flow immediately? 

By selling your invoices, also known as Accounts Receivable Funding, or factoring your invoices, you turn your accounts receivable (one of the largest drains on corporate cash flow) into immediate and available cash.  With this new-found liquidity, you can:

Reduce or pay off your expensive short term debt.  This not just another loan.

Use cash to buy inventory.

Take advantage of immediate opportunities, new clients or bigger contracts.

Cover short-term payroll and related taxes, even if sales slide a bit.

You can even set up a flexible line of credit that depends only on your sales,

not a fixed, bank imposed limit.

Factoring gives you the greatest tool you need to survive a recession.... CASH! 
 
Capital Conversion Group LLC can not only provide your business with positive cash flow, but also cut your expenses by offering professional accounts receivable management.  Our funding sources also help you control business losses by offering credit insurance against selected invoices.  This insulates you from severe loss arising from the non-payment of invoices due you arising from customer bankruptcy.  Through selected programs, Capital Conversion Group offers these recession busting features at no additional cost when you use their services.  
 
Without question, periods of economic decline can be stressful and challenging for business owners. Smart business owners know there are many things that can be done to ensure business solvency and profitability during these times.  A business owner that chooses to sit idly by and wait for the recession to pass is gambling with the survival of his company. Business owners that are pro-active and strengthen their company in advance will give themselves a fighting chance and may even come out of the downturn with a better and stronger company than they had before.  It is then that the smart operators have the ability to really separate themselves from their competition.
 
To discuss how Capital Conversion Group can help position your company to survive the coming months...please call me now, Ted Resnick, at 216-382-6444, or email me at Ted@CCGfunding.com . Call now to strengthen your business for the coming crisis and position yourself for the future rebound.