Navigating Economic Changes for Business Owners

By: A.J. Kohn, Vice President, Treasury Management Officer

It’s nearly impossible to predict the future, which can be scary for any business owner. When it comes to economic changes, especially around labor and tariffs, the unknowns of how it will impact revenue, profitability and expenses can be difficult to navigate. But, taking small steps will help business owners weather any incoming storm.

Optimize Inventory

Many business owners are worried about more expensive inventory. If you have the capital to beef up your stock, consider what you can buy now without depleting your reserves. When buying in bulk, you may get a larger discount. You can also negotiate with suppliers on price if you can pay ahead or buy more at a time. If you know for sure that these products will be used throughout the next year, it may be worth it to buy more inventory early.

Additionally, don’t let unsold goods tie up your working capital. Make it a goal to sell inventory fast. Create a strategy or internal benchmarks you want to hit each day, week or month and stick to them.

Speed Up Receivables

If you’re trying to lessen the time it takes to get funds into your account while improving efficiencies, look at your receivables processes. Reducing your DSO (Days Sales Outstanding) allows for more working capital to be utilized today. You can do this in a few ways:

• Send invoices as soon as possible.
• Offer multiple payment options to your customers like ACH, wire transfers and credit and debit card payments. Avoid checks at all costs, as they require physical delivery and handling, have a higher risk of fraud and create more work for your staff.
• If checks are a necessary part of your receivables process, especially in large quantities, consider a lockbox to help you manage and reconcile those items.
• Just like you can negotiate with suppliers, negotiate with your customers who are willing to pay quickly or buy in bulk.
• Run credit checks on new customers to minimize the risk of non-payment.

Develop Your Accounts Payable Strategy

Once your receivable processes are optimized and you’ve switched to more efficient payment types, figure out how else you can streamline your other accounting processes. Increasing your DPO (Days Paid Outstanding) should be an elevated area of focus. Consider running a vendor match, which tells you the payment types your current vendors allow. Look for vendors that offer payment options besides checks, which take longer to process and can be subject to fraud.

If you don’t already have a P-card (also known as a purchasing or procurement card), strongly consider getting one for your business. This allows you to create more of a strategy for paying expenses, allows working capital to remain in operating accounts and can include incentives like an annual rebate to infuse money into your business at the end of the year.

Today’s labor market is tough, and many business owners are being stretched thin as the workforce isn’t what it used to be. Look into what else can be automated in your business to fill the gaps. Technology and financial technology offer ways to optimize your processes and productivity. Look for ways to use these tools in every part of your business, whether creating content, doing repetitive tasks or brainstorming new ideas. The efficiencies and automated processes can reduce workload for some employees, allowing them to focus on skilled tasks.

The tariff and labor landscape changes constantly. Keep an eye on what’s going on, and don’t make any rash decisions. With so many unknowns, don’t jump into something unless you believe it’s absolutely necessary to help your business grow. Taking a more conservative approach to finances is essential in uncertain times and can help keep your business going for years to come.

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