Companies in a financial crisis should seek the assistance of an accountant, who should have been advising them all along about financial health and to avoid bankruptcy. Recommendations for companies in financial trouble are as follows:
1. Diversify your venture enough so that you don't depend upon only one customer or industry. You should not derive more than 15% of your business from any one client. It can be appealing to grow quickly by being a large supplier to a small amount of customers; however, this can make your operations vulnerable to pressure from those same customers.
2. Always keep low overhead and costs in check. Many companies have high expenses when times are good, but can't cut back when business is light. Always evaluate your need for every purchase, and realize that there will be good times and slow times, so balance is the key.
3. Save a cushion of cash equivalent to a couple of months' overhead expenses. If you cannot do so, the problem can escalate and create more borrowing and accounts payable which increases debt.
4. Consider relocating your business to cut your expenses. Even if you aren't in a financial crisis, it makes no sense to stay in a location that drains your resources.
Some other good advice is to focus on sales, reduce your costs, change pricing, and develop a strategic plan. You must tackle any problems that come up as soon as possible to keep your business intact and operating in the long term.
Copyright Jeanine Pfeiffer