By All Accounts – Payable – Whom Do You Pay First When Cash Gets Tight?
August 22, 2008
We are facing some frightening times. Gas prices are at record highs, which not only affect what we pay at the pump, but push up prices on most goods, as transportation and other costs increase. Furthermore, consumers are unwilling or unable to spend as they have in the past due to these perceived price increases. As a result, many businesses are experiencing cash flow problems that they have not experienced for many years and are struggling with how to keep current.
When the inevitable cash crunch hits, are you prepared for it, and what will you do?
The first thing that needs to be dealt with in order to prevent a crisis is a complete review of your company’s budget to determine any areas where there may be some fat or find other reasons to curtail expenses. This is a difficult decision, as certain expenses that appear discretionary, such as promotional and advertising costs may be quite essential to keeping a business going in order to get to a turnaround.
A more difficult decision is with personnel costs. These are usually the highest expenses in a business, exclusive of inventory. Cutting back on personnel sends a message to the community, and more importantly, to your employees, that things are not going well. This could have a deleterious effect on your organization. Therefore, it is important at some point to communicate, with at least the key employees, as to what the situation is with your business and to elicit their help and support during difficult times.
Once you are satisfied that the budget is in proper form and reasonable, how do you wait out the storm?
In almost every business, a substantial amount of the expenses are…
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by: Paul R. Salvage, Esq.
Business to Business
August 18, 2008