Five watchwords in a downturn
The Institute of Directors has suggested five watchwords for businesses facing an economic downturn.
?We have a strong, well managed economy, but regrettably, Jersey cannot hope to escape some effect from the current global financial crisis,? said Gary Drinkwater, Chairman of the IoD Jersey Branch.
The IOD do expect a slowdown in the financial services sector and that will affect those both within and reliant upon the industry. Jersey has sold itself for a number of years as a quality destination for business. In the months to come the IOD feel that we will also have to show that we can compete keenly on price in order to win new business. Mr Drinkwater suggested that some more businesses in Jersey may become insolvent before economic conditions improve. He said: ?We?ve already seen a couple of Jersey businesses cease trading. I know some others are worried about the future, particularly in the retail sector. For that reason we are advising directors to review their companies to ensure that they are prepared for difficult trading conditions.?
The IoD?s advice for companies is:
Businesses should review their cost base. Operating expenditure can be controlled, revenue cannot.
Smart companies will hold onto cash to assist them should they see a downturn in trading.
It may be wise to reduce payment terms to assist with cashflow and devote more resources to ensuring that invoices are paid on time.
Diversification is a smart move in a downturn. Companies reliant on one customer for more than 20-25% of revenue are overexposed to risk.
In a downturn it is more important than ever to perform a monthly review of your company?s performance against budget. Frequent reviews of your own performance against budget mean that you can take early action if the company is not performing as expected.
There is no doubt that it is going to be an interesting year for business and the companies that act smart rather than those that make drastic cuts will be the ones that benefit.