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Friday, 15 August 2014

The Recession's Over: Clean Your Financial House and Win

If you were an operations leader during the 2008 Financial Crisis and deep ensuing recession, you probably spent a lot of time on the phone like I did, literally begging vendors and business partners not to cancel credit lines or change payment terms vital to keeping a business afloat.

If that's the case, none of us were alone as total credit market debt held by American businesses peaked in 2008; contracting by $247.7 billion in 2009, the worst year of the downturn; not reaching 2008's levels again until 2011 or 2012.

So what happens when nearly a quarter of a trillion dollars in business credit is siphoned out of the economy in one year, customers pay you slowly for past business, banks stop lending, and customers stop buying new products?

Welcome to the world American COO's, CFO's, and CEO's faced just a few years ago: a period of intense struggle and fight or flight mode for many of us.

Thankfully, business lending regained traction, increasing from $11.66 trillion in 2008 to $13.60 trillion in 2013 and there's no longer scores of doom-and-gloom reports about small business owners who had their business credit cards cancelled with little notice from lenders.

Now that the "worst" seems to be over in this area, hopefully, business leaders are able to breathe again and get back to growing their companies after several tough years.

Here's some things to consider moving forward:

Clean Up Your Balance Sheet: If you still have unpaid balances with business partners, tally them up, formulate a realistic plan to retire your debt, and contact the vendors as soon as possible. Americans are a very forgiving lot, even in business, and professionals that you work with at one company can easily become new business partners in another organization someday.

Additionally, it's much easier to reinstate cancelled or dormant credit lines with vendors once you're paid up with them; providing you more resources that you can leverage as you go out to win more business and grow your company.

Shore Up Your Banking Relationships: Before the downturn, we worked with a fantastic business banker. He looked like a winner, was smart as a whip, and always had half a dozen ideas for helping us improve our business and maximize our relationship with his bank. Unfortunately for us, our banker received a promotion and we never "took" to his replacement; generally feeling that this individual had little sense of our business needs or our business in general.

However, in 2010, our business hit a rough patch and my weak relationship with our new banker became glaring; leading to us to briefly "audition" replacement banks, before being reassigned to work with a more proactive banker at our home bank.

Don't make the mistake I made several years ago. A growing business needs strong financial relationships and I didn't ask our new banker to lunch or bring them into our office to see if they had any genuine ability to help us. Instead, during a tough time, I worked with a stranger and that's exactly how our new banker treated us.

Now that the downturn's over and hopefully your overall business and balance sheet is in better shape; this is a great time to be scheduling lunch or a meeting with your business banker when you don't need them, so you can draw from a well filled with water instead of the dry well I dipped in four years ago.

Reward Your "Foxhole" Partners: Who stood by you through thick-and-thin when things got rough in 2009 and 2010? The business partners who didn't shut off your copiers or seize your computer equipment when you couldn't make regular payments and struggling to bring receivables in.

If you haven't done so, those business partners should be thanked and lionized by your organization. They stood by you during the worst of times; imagine what kind of partners they'll be now that things are improving.

Punish The Cowards: Who cut-and-ran when things got rough in 2009 and 2010? The business card issuer who cut your credit line by 70% or the vendor who put your account on cash-on-delivery (COD) status when you were trying to complete an important client assignment.

If you haven't done so, those business partners should be put under review by your organization. They didn't stand by you during the worst of times; why reward their cowardice and lack of faith in your business now that times are getting better.

Aren't you glad it's not 2009 or 2010 anymore?

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