Navigating through tough financial times

2 mins read


Business Consultant MIEE, MBA, ACIMC

The months to come will be quite promising in terms of economic challenges that Cyprus businesses will face. Such issues need to be addressed sharply with decisiveness but not necessarily in a rush.
The follwoing simple but effective guidelines can help a business overcome the downtrend successfully maintaining a competitive edge for the years to come.

This should be the first and immediate area of a manager’s attention.
• Time schedule your cash flows to ensure that the funds needed for keeping your company alive are always available.
• Identify those customers with high credit risk profile and treat them accordingly. Try to shorten payment periods to ensure funds coming in.

The economic environment as it is being shaped today has one dominant characteristic: weak customer demand.
• Review your customers’ profile. Segment and target them according to their price sensitivity. Willingness to pay high premiums for brands is also expected to weaken.
• Understand the economic fundamentals. Determine and understand how elastic your products’ demand is. That is, to which extent the bad economic environment influences the demand for the specific products you sell.
• Concentrate on helping your customers succeed rather than how much to profit out of them. The time for charging high premiums has long gone.

Analyse and review your costs. Do not make unnecessary reductions.
• Start with the telecommunications and IT services.
o Try to identify services that you actually pay and you don’t use.
o Ensure that you have no unjustified charges for phone calls made to restricted destinations.
o Try to adopt new technologies that can better support your business functions, save you money and boost your performance.
o Negotiate with your provider better terms by committing to a longer subscription time.
o It is possible to reduce costs by outsourcing specific in-house applications to a third party, such as your mail server or your PBX system.
• At the HR department.
Cutting jobs is a painful process but a drastic one in terms of cost reduction. Reducing staff however should be a “last resort” measure.
o Instead, agree with your people a limited time salary reduction or other adjustments in their compensation.
o Try to culture a sense of urgency and commitment and at the same time communicate that the ultimate goal is that everyone keeps their job.
o Freeze any new recruitment and try to identify operational functions that could be outsourced to a third party.
o Find synergies and win-win situations with employees. One example is employees using their own car for business purposes and receive a fee per km travelled as compensation.
• Review your suppliers.
o Try to consolidate purchases to increase your buying power.
o In case of imports, consider exchange rate fluctuations when selecting suppliers. Depreciated GBP for example, provides an opportunity for low cost purchases.
o Search for new suppliers with better propositions or cheaper substitute products.
• Promotional expenses.
o Reduce them but not eliminate them.
o Seek new innovative means of promotion. Technology provides nowadays great opportunities for low cost and effective promotion. Banners on websites, email and SMS campaigns are just a few examples.
• Process re-engineering. Redesign your procedures and processes. Make them simpler and more efficient.
o Try to identify activities that are currently carried out but do not add value to your customers and cancel them out.
o Reorganise the way you do business, so that you don’t need stock or inventories.
o Centralise your key functions to earn economies of scale.
o Narrow your product range. Identify and abandon non profitable products.

Closely observe your competitors. Try to identify areas of weakness and come up with a better customer proposition. Alternatively, join forces to mutually benefit and improve position in the market. Sharing production resources for example may be a good way to overcome the economic difficulties and survive.