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Whether the country is sliding into a recession or not shouldn’t really matter to small and entrepreneurial businesses.  Let the economic gurus debate over the state of the economy; business owners should be taking action now to ensure their survival and continued success.   

Be on the lookout for tell-tale signs that your business will be affected in the upcoming weeks and months.  Are you sensing greater concern from your customers about their businesses?  Are customers taking longer to pay you?  Has your pipeline of new business or prospects dwindled lately.  Are companies taking longer to pull the trigger on purchases?

There are steps owners of privately held businesses can take now to prepare for a sluggish economy.  They include:

Review your budget on a monthly basis.  Keeping track of expenses, sales, margins, cash flow and other indicators allows business owners to make informed decisions in an economy that can be shifting relatively quickly.

Watch receivables closely.  They can be an indicator of how hard a business’ clients are being hit by an economic downturn, and could provide an early warning that clients are about  to cut back on their purchasing.

Evaluate all expenses.  In a strong economy, business owners may neglect to review – or re-price – the services and supplies they purchase.  Review the services to see which ones are no longer needed, and research prices and offerings from different vendors to see if there are cost-effective alternatives.  

Ensure cash flow remains healthy by matching account receivables to accounts payables.  Review and revise processes for collecting payments, and get more aggressive with reminders and phone calls when payments are late.

Offer credit card payment options to slow-paying customers.  Swallowing a 1.5 percent processing fee to the credit card companies is a small price to pay for having the cash on hand to operate your business.

Take advantage of services offered by your bank.   Services such as “sweep accounts” push money in an interest-bearing account from a business’ checking account each night, and “sweeps” it back into the checking account in the morning, when funds are needed.  

Refinance debt.  As the economy slumps, the Federal Reserve has lowered interest rates.  With interest rates low, entrepreneurs may want to refinance debt, or turn their line of credit into a principle and interest loan in order to pay down debt.
     
Negotiate with vendors.  Many vendors will provide a discount for payment up front.  Others will provide discounts to loyal and longtime customers.  If cash flow is an issue, request an extension of credit with them, so that your business can pay invoices in 60 days, instead of 30.  
     
Begin accumulating a cash reserve.  Similar to a personal “nest egg,” a business’ cash reserve can be used for emergencies such as a recession, or for special occasions, such as an opportunity to acquire another company.  While profits should be used to grow the business and to reward owners and employees, make sure a percentage is reserved for later use.