The accounting firm of HBLA sent me a checklist for things companies should prepare for given the increasing likelihood of a recession in 2008. More than a handful of these tips related to managing cash flow and the working capital position of a business - not unlike those I posted here.But given the continuous darkening of clouds on the horizon, a few of those are worth repeating below:
- Review the operating and cash flow budgets for a variety of scenarios (best case, likely, worst case) and develop plans for each.
- Identify your company’s KPIs - key performance indicators - such as days sales outstanding and days inventory outstanding. Both could impact company liquidity and, in turn, impact borrowing levels and costs of financing. Make sure your business has timely and accurate financial reports on KPIs.
- Review credit and collections policies – your customers will get into financial trouble during a recession. Bet on it. Don’t let it become your problem as well!
- Review capital expenditure plans and evaluate the impact of alternative acquisition methods: purchase or lease with due consideration to impact on operating results, cash flow and financial ratios.
- Communicate with your lender and, if necessary and possible, negotiate for increases in your line of credit and more flexibility with your loan covenants.
Tags : HBLA , working capital , cash flow , days sales outstanding
No comments:
Post a Comment