Now is a good time to stress test your business to see how it would stand up to a bank review.
The first area to start with is to look internally to see what improvements could be made. Could your working capital be better managed? This involves stock, work-in-progress and debtors. Could the investment in any of these areas be reduced through closer management supervision? Are you able to renegotiate terms with suppliers? Banks are difficult to deal with and most finance packages are only current for 12 months. Will you be able to satisfy the bank’s requirements? How are you performing against the bank’s covenants for loans, bank overdrafts etc?
Does your business convey a strong presence in the market which allows you to stand out from the crowd? Some of the items that you should be considering include Budgets and Cashflow Forecasts. For most banks these are now a given and, even if you are not asked for them, it is a good idea to submit them to the bank. Business plans should be updated and reflect the current business operation.
The other areas the banks are now closely looking at include branding. What is your key message? What is the unique selling proposition your business is offering? Are you articulating these key factors clearly so that you are very visible in the market place?
All of these things help to de-risk your business in the eyes of the bank. How will your business perform if there are further downturns, primarily because of the problems in Europe? Are your employees presenting strong positive messages to the market place, to customers and to the bank when they are talking to bank employees?
If you don’t already do so, it is not a bad idea to create a firm commitment towards improved communication with employees. There are a lot of negative comments in the media at the moment about the world situation, the Australian political situation, Carbon Tax etc. It is a good idea to tell your employees that you have a plan on how to positively run your business.
If you would like some assistance in being prepared so as to withstand a bank stress test on your business, please contact us for a review of your business.
