We all know that cash is king, and is often referred to as the ‘life-blood’ of any business. This analogy is as true now as it was in the 2008 financial crisis and even as far back as the great depression of the 1930s. Despite the current troubles, there is one common denominator, they all passed and the economy recovered. Whilst this is a very different downturn, keeping your business up and running is essential. Here are some of the tips business changes you can make to try and better manage the cash flow within your company that could save jobs and your future operations.
Analyse all of your suppliers and work out where savings can be made
A lot of companies will have started the process of cutting back on the number of suppliers and withholding payments from them. Whilst this may be necessary, it can only act as a short term fix for a business’s cash flow. If as a result of the restrictions they have to restrict operations and cut back on selling, this could lead to a drop in cash flow in the future. This is where a contra-dealing strategy can come in.
Say you are a paper merchant with the ability to print and brand products. The inclusion of 30-day payment terms may put a strain on your finances which you do not need during tough times. However, if your supplier is looking to get some printed products for their company, a handy contra deal could be made. This allows you to get your hands on stock and keep your printers and staff productive during periods when your company may be experiencing decreased demand.
This is where to beauty of contra-dealing comes in. whilst it still has to be logged as a transaction in the business as with any for HMRC, it can massively help with cash flow. Giving you stock to sell, and liquid asset for your business. This may be a pretty basic example but there are a variety situations where a contra deal that follows the same principles can be applied.
Contra dealing may help, in more ways than one
With the current rise in redundancies and people working from home, this is certainly not a time where people are going to be in optimum health, mentally and potentially physically. If you are in a company that has recently seen a drop in the amount of work that needs to be done by your staff, switching over to some contra deals could be a big help.
Say you were looking at a prospective client, like web publishing company. They may have recently paused activity or pulled out, due to them wanting to work on their own cash flow. Why not offer to do a portion of the work in exchange for say, a banner ad and a sponsored article. This may seem odd at first but break it down.
- They may have seen a drop in businesses looking to advertise with them
- You can help keep their website populated with new content and their staff productive
- Your staff will also have something to do, increasing their feeling of security and perhaps health
A contra deal like this will not be the answer to all of your problems, but if you do not keep your staff trained and motivated during this time it could lead to a dangerous drop in productivity in the long run. Activity like this could be a great way to make your staff feel useful and ‘on the ball’ when it comes to the return to performing full billable work in the future.
Business funding can be found through unconventional sources
Gone are the days when the only way to seek funding for new ventures was through traditional banks. Now funding can be found through a variety of different sources. These range from contra dealing, which can be great for relieving some of your businesses cash flow issues, and peer to peer lending. The latter is an industry which has seen a rise in demand after the breakout of the recent virus, due to a surge in businesses seeking loans.
These unconventional sources can all be used in tandem to try and keep your business healthy in a time of economic uncertainty. Contra dealing is great for giving your business an instant injection of cash and assets, whilst crowd funding and peer to peer lending will be beneficial if you are looking to expand operations as we head in to a more stable economic period.
Find Contra deal directories where you can network with other businesses
You may be in a situation where you have unexpectedly lost a supplier or customer, this can be a serious challenge no matter what industry you operate in. When this happens you may be at a loss to what you can do to cause minimum disruption to your operations. Remember, contra deals are not only agreements that can be made with current contacts. A variety of online directories exist that meet the demand for the trade of goods and services. They all have their different features and benefits and some may specialise in different industries so be sure to do your research so that you can pick the best one for your company.
Ensure you know some of the legalities and rules of best practice around structuring contra deals
Contra deals are a fairly simple concept and they do not require a huge amount of legal paperwork and processes, particularly if both parties are on the same page. Make sure you have a basic understanding of how to structure a contra deal and other ways of reducing your business costs during times of economic uncertainty.