Thursday, January 1, 2009

Business - Action Points in a Down Economy: Conserve Your Cash

Cash is king in a down economy. Horticultural businesses should do everything they can to conserve cash. Cash on hand is critical for borrowing, to pay for operating expenses, and as an insurance against further declines in business. The following are some cash conservation strategies:
  • Delay non-strategic investments, that is only those investments that are essential to your business plan should go forward. However, this does not mean you should miss out on opportunities to make your business grow. For example, if a competitor is going out of business, you should consider if it is in your best interest to buy their business.
  • Refinance what you can. Interest rates will not be this low in the future. Take the opportunity to reduce loan payments at a more favorable interest rate.
  • Take full advantage of credit terms. If it is net 60 days from your supplier, pay on day 57, not day 15.
  • Sell unused assets if possible. That spare piece of equipment can bring in needed cash to operate.
  • Apply for credit long before you need it. Get your line of credit established and use it to your advantage rather than spending your reserve cash. Remember that interest rates are very low now.
  • Reduce estimated tax payments. If you feel your profits will be down, don't send the government as much money in estimated taxes.
  • Review all overhead expenditures and reduce where possible. For example, see if you can reduce insurance premiums.

Information from a talk by Dr. Charlie Hall from Texas A&M University.

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