Safeguarding your business in these challenging times

Fri, Oct 14. 2011

Grow Your SavingsFinancial Information Month October 2011

by Cerlian Russell
Bank of St. Vincent and the Grenadines Ltd.

I would like to commend the Eastern Caribbean Central Bank for once again recognizing the month of October as financial information month.

The global financial crisis of 2008, along with the volatility in oil prices, continues to create major challenges for businesses in St. Vincent and the Grenadines, especially small businesses. The vulnerabilities of our economy are highlighted from the negative impact of these phenomenal events which have resulted in massive reduction in remittances, tourism receipts and foreign direct investments. With less money in circulation and the unpredictability of the recovery in Europe and North America, the road to recovery in our local economy could only be longer.

In anticipation of the uncertainty in the economic times ahead, it is incumbent on businesses, especially small businesses that have very little elbow room, to explore all possibilities for your business to be able to withstand the harsh and unpredictable conditions ahead. The following are some proactive measures businesses could consider as they try to safeguard their investment/ business in these challenging times:

1. Do an immediate review of your business: The objective of this review is to analyze the business operations for areas of strengths and weaknesses, with the intention of developing a medium and long-term plan. The main objectives should be to capitalize on any opportunities available while minimizing the impact of the external threats.

2. Build liquidity and create cash reserves: In these times, cash will continue to remain the King. Be conservative in projecting your cash flows by discounting your sales 10%-20%, creating a worse cash scenario. Avoid excess inventory and create sale for slow moving inventory since cash would be required to be restocked. Keep some of this cash as reserve for more rainy or difficult days.

3. Review all credit terms: Now is an opportune time to review all credit terms given and received. Tighten your accounts receivables and negotiate more favourable payment terms from your suppliers. Open new credit line in case you may need it rather than waiting until your circumstances change, which could send a different risk signal to your creditors.

4. Create a culture of eliminating wastage and cost reduction: Now is the time to focus on removing the fat by creating more internal controls that would help to measure and monitor key areas identified for cost savings. Pay attention to areas such as utilities consumption, printing and paper cost, inventory management and pilferage. Increased productivity should be the order of the day, and idle time minimized or fully eliminated.

5. Avoid risky investments: Avoid making risky investments that encourage you to put all your resources in one investment while going after high return/interest rates. Your focus should be to diversify your investment portfolio to minimize risks. Do your background checks on the credibility and viability of the investment as part of your due diligence and risk assessment prior to making the investment. Avoid making investment decisions on emotions and so call “sweetheart deals.”

6. Create strategic relationships: Now might be the opportune time to create an alliance to help your business battle the harsh conditions of the external environment. Your own survival might just depend on you having a strategic partner to help weather the global financial storm.

In Conclusion, while the above recommendations might be very useful strategies at this time, the single most important strategy to help safeguard your business in these challenging times might just rest in the quality of service you provide to your customers. How important your customers are to your business and the level of respect and appreciation they receive are the questions you need to answer.