By Jason Sullock, New Customer Marketing Manager, Sage

Here’s a snippet of the whitepaper of How You Can Survive The Credit Crunch.

News reports regularly explain the “credit crunch” in terms of the US sub-prime mortgage sector, the plight of international banks and erratic behaviour of capital markets. But tightening economic conditions have a direct impact on small businesses. Loans and overdrafts are more difficult to negotiate, interest rates are higher and it gets harder and harder to get debtors to pay up.

The most dramatic effect of the credit crunch is the increasing number of company failures, but credit specialist Atradius also points to a sharp rise in the number of firms delaying payments or seeking to extend their credit terms to three and four months, or more.

Businesses caught in the squeeze have a few simple things they can do to maintain a healthy financial condition:

- Cut costs - reductions can be sought in running costs and overheads, for example through better management of stock.

- Reduce debtors and manage cash better - many successful small businesses manage cash first, and then worry about profit. Taking a more systematic approach to debtors helps cash flow, reducing the need for bank overdrafts and loans. Monitoring how the cash position is changing compared to your plans and forecasts can alert you to problems before they get out of hand.

- Review your processes - are they as effective and economic as they could be?

- Make time to chase debts (many small businesses do not do this)

Sage has experience supporting hundreds of thousands of businesses with software and advice. The suggestions and checklists in this paper are based on techniques that have worked for other companies and are backed with features built directly into Sage accounting applications to help companies control their costs and cash flows.

The easiest way to tighten your financial belt is to look at discretionary costs such as entertainment. Review your outgoings to find unnecessary costs and look at supplier contracts for opportunities to renegotiate.

If you are a stock-based business, a lot of your working capital can be tied up in stock. Take a disciplined approach to managing your stock. Being able to keep levels to a practical minimum will save you money. If cash is particularly tight, consider discounting the price of excess stock to reduce your holdings and generate cash. If you’re a service based business, you may want to consider tracking your jobs and setting more accurate budgets etc.

Want to find out more? Download the rest of the whitepaper on: How You Can Survive The Credit Crunch.

Twitter: @sageuk
Website: www.sagehello.co.uk

Sage are offering Fresh Business Thinking readers a 5% discount on any of their software & services including payroll, accounts and CRM packages. Please visit
5% off Sage software for all Fresh Business Thinking readers to purchase. Please enter Code: 5FRESH11 in the promotional code when you view ‘your basket’

Watch the video below featuring Paul Hepburn, Financial Accountant at Sage talking about the top tips for VAT and good sources of financial advice.