Credit Matters Blog

“Key Factors for Surviving the Recession”

Kim Radok 06 July 2020

“Key Factors for Surviving the Recession”


Let us not beat around the bush, the recession has started. Nothing will be the same for anybody, business people included, once the first stage of the recession is completed. By that I mean, the isolation period caused by the COVID-19 virus is deemed to be over, or manageable. You must be prepared to change and adept to a new order where such things as protecting your cash, reputation and paying your debts in a timely fashion are paramount. These three objectives apply both to your personal and business lives.

In an effort to help business people survive and think more businesslike, and with a positive outlook, a series of mini-blogs, both written and in audio formats have been prepared. These blogs will become available at over the coming weeks.

Each mini-blog will focus on one key factor at a time. To date, you have probably been inundated with information from many different sources on how to survive financially and emotionally in the short-term. For instance, I am sure you have been focusing on working from home, isolation from family, friends and work colleagues, buying provisions etc. Consequently, your mind has probably become cluttered with all sorts of information. It is therefore likely you may not have had time to think strategically about the future of your business in a calm and rational manner.

The first thing is to realise that waiting for the recession to hit officially, or to procrastinate about what to do next, are the worst things you can do. I suggest it is now time to focus on the future and to act positively to protect your long-term interests. Yes, there will be factors you have little control or influence over. There are however many other factors you can concentrate on which may help you to survive the coming recession.

One source of information, amongst many is  where you will find a number of strategies which may be of value. Two features in particular may be worth reading. These are 1 “Anatomy of a Recession” and 2 “What will the future look like in 2020 for B2B credit?”

To survive the recession and come out the other end in the best possible state, your objectives must include identifying whether you have the financial resources to survive the recession. If you don’t have these resources, working to close down your business with a minimum of financial, emotional and reputation loss, may be the best decision you ever made.

In this series of mini-blogs, our first blog will concentrate on identifying whether you have the financial means for your survive.


I think it would be wise to now take a break and really engage your mind and resources on the project ahead. It is really important that you clear your mind so you can engage with these mini-blogs and concentrate on the issues ahead properly.

Our next blog will the first of 10 key factors for surviving the recession, financial resources and liabilities.

The 10 Key Factors for Surviving the Recession

Part 1 – Financial resources and liabilities

“A business without cash, is not a business” said an accountant many years ago.

Accountants and insolvency administrators have also said over the years, that cash is the life blood of a business. Like a human body dies when there is little or no blood left in it, so does a business when it runs out of cash.

Today we live in a world which can and will drain our business and personal cash resources. The truth is, that in most situations in the future, many people will want your cash, whilst others may be unwilling or unable to give you cash in return.

Moving forward therefore, your first responsibility is to protect your cash resources, either those in the bank or available by accessing cash via finance options.

In the case of any trade debtors, make sure your business is paid as quickly as possible is at the top of the list. To facilitate this objective, eliminate the causes of mistakes and ensure all invoices are raised correctly. These two key factors allow debtors to use as an excuse to slow pay or avoid paying your invoices. In certain cases, you may wish to offer a discount for early payment. Take care how you frame the offer for a cash discount. There are always other factors which may come in to play if the offer is put in the wrong fashion and accepted by your customers.

If you have already obtained finance from creditors via loans, supplier accounts, or any other legal sources, paying off these creditors within terms, or even ahead of time for a discount, is essential.

In particular, I believe overdrafts are just time bombs waiting to go off for many business people. In many cases and quite reasonably, they are used as a supply of short-term funding for seasonal payment factors. Unfortunately, they often become a lifeline for funding day-to-day operations which is not what they are intended for or will be accepted long term by your bank.

It is wise to remember what happened in the GFC regarding business overdrafts. Many business owners at the time were called to meet their bank managers during the early stages of the GFC. On arrival, they were told in no uncertain terms to:

1          clear the debt;

2          provide security; or

3          sign the personal loan agreement handed to them for their signature, on the spot.

On review of your situation, you may identify there is no possibility that your business will survive long enough to trade your way out of its liquidity situation. In that case, you would be wise to close the business down, and I stress, in a responsible manner and within the law.

You may be able, if experienced enough and you have access to cash, to complete the task of winding down your business in a responsible manner and protect your business reputation. This will allow you to start again in the future if that is your desire.

If you are in doubt however on your ability to complete the closure of your business, or lack sufficient cash resources to clear all debts, you should seek help from a reputable firm or professional.

This concludes the first key factor of survival, financial resources and liabilities. After a short break we will resume the next key factor, your reputation.

Part 2 – Your Reputation

Your reputation is a key factor for business and personal success. Over the years, many business people in particular, have often failed to protect their reputation by thinking they were exempt from the loss of reputational damage. It may be these people felt they were immune to reputational loss through money, status, “smart business strategies”, which were often proven to be not so smart, or by bluffing their way through tough times.

The reality is that this time, especially if you and your business do not have a good at the start of the recession, you are already behind the eight ball, Regaining a good reputation will be an uphill battle and even then, you may find some business people will still not trust or forgive you. If you have had a good reputation in the past, it is of paramount importance that you work to keep it intact.

Make no mistake, we are in for an extended of disruption and trauma not seen since the 1930s Great Depression. The closest we have come in recent times to a depression was the Global Financial Crises (GFC). The learning experiences of the GFC unfortunately have been largely forgotten. Therefore, it is likely for many people who went through the GFC, the same experiences will return like a bad nightmare as the current recession deepens.

Bluffing, using “smart business strategies”, paying outside of agreed business terms and a lack of communication, will therefore not hold up in the long term. You will soon be found out as I repeat, we are entering a whole new business environment once the COVD-19 virus is deemed to be manageable or over.

In the previous blog, I mentioned the importance of quickly closing down your business ethically if you found there were insufficient financial resources to survive a prolonged recession. The importance of taking this action cannot be over emphasised in protecting your reputation. After all, you are not only trying to reduce your financial and emotional wellbeing losses in taking such action. You are also acting to protect your short-term resources whilst acting for the long term and to make a business comeback if desired.

There are less places to hide your bad behaviour these days. If the media doesn’t have a story about you and your business, some other party is likely to have the evidence of your behaviour. Protecting your good reputation will be equal to dollars in the bank for the future.

This concludes the second key factor, your reputation. After a short break we will review the next key factor, cash protection.

Part 3 – Cash Protection

If you wish to survive the next few years, you must protect every dollar leaving the firm and quickly seek the return of every dollar owed to your business.

In other words, you need to ensure every payment made has been properly authorised and you are not paying fraudsters. Likewise, getting paid for all outstanding invoices as quickly as possible if you sell on credit, is also essential.

Protecting the cash in the bank, is relatively straightforward in one sense and for most business, treated properly and with a degree of adherence to risk management norms of behaviour. However, in these tough times, it would pay to review everything you do and complete an audit on due processes and take extra precautions.

Due diligence and vetting all suppliers and customers to authenticate ownership and trading terms is a must. Likewise, monitoring and completing due diligence on all emails received to ensure you only pay authorised invoices.

Whilst reconciling the bank account(s) is a normal practice, completing reconciliation of suppliers and customers accounts is not often completed these days. Moving forward, it is a MUST that every supplier and customer account now be reconciled. Reconciliation of these accounts allows you to pick up duplicate payments, payments for cancelled invoices, making sure every deduction by customers has been authenticated etc. It would wise to remember the old saying, “computers don’t make mistakes, people who input data do!”

We are now living in an age where fraud, in all its forms, is a major business hazard. Fraudsters are very good at what they do, because that is their business. I cannot emphasise enough the importance of supplier and customer account reconciliations, due diligence, maintenance of business disciplines and good processes, which are required to protect your business’s cash in the bank.

To further assist in protecting your cash, the employment of qualified and dedicated professionals is the final factor to help ensure the above issues are complied with and followed through. The right people may be annoying with their questions and suggestions, strict adherence to procedures and wanting to do the “right thing”. However, they are able to do things that technology can never do, well at least not yet.

At the end of the day, bad technology and installed for the wrong reasons will aid and abet fraudulent behaviour, add extra work and fail to resolve problems, which will have to be resolved by people. You may as well invest in good people from the start.

If you wish to survive the coming recession, cash will be essential. Protecting your cash properly therefore, is a no brainer!

This concludes the third key factor; cash protection. After a short break we will review the next key factor, employees and contractors.

Part 4 – Employees and Contractors

PEOPLE, make or break businesses.

Within your business, from management to the warehouse, maintenance or accounts employees, the best of these people will be working to keep your business going. Those with vested interests, the disenfranchised, the Marvellian types and those with alcohol, drug and gambling problems, will be causing damage.

Other people from outside your business will attempt to undermine your business at every opportunity. These people include the do-gooders of the world, bureaucrats and legislators who have never operated a business, slow paying and manipulating customers, suppliers who never deliver and fraudsters who just want your money.

It is therefore critical in a recession period that you employ good and honest people throughout your business. It is these people who will strive to do the right thing by the trading entity and people who employ them. If your business succumbs to the temptation of employing people who are cheap, or to underpay those that are employed, or people who leave their brains at the front door of your business, then this not a good recipe for survival in a recession.

What is especially important is to employ people as appropriate for the size of your business. In my view and based on many years in the real business world, employing contractors from your own country, can be the difference between smaller businesses surviving and growing or failing.

In larger businesses, all people involved in the business should be, in the majority of situations, direct employees. At the end of the day, no person can serve two bosses properly. This applies particularly to sales, customer service and accounts people. After all, these are the knowledge workers and key front-line protectors of your business.

Cheap upfront employment options, such as outsourcing critical tasks, especially to people from an overseas country, is fraught with trouble. When you employ mercenaries to guard the safe, you cannot complain if they steal the safe or let a higher bidder take your money. Likewise, if you allow outsiders manage your customers and suppliers, you cannot complain when they leave if they take your customers and suppliers with them.

Even in the good times, we have seen many employees and contractors do the wrong thing. I would suggest in a recession, this situation will only get worse. All people are tempted at some stage, if under enough pressure, to do the wrong thing. Counteracting the desire to do the wrong thing, can only be achieved, in most situations, by employing the right people under the best possible employment conditions.

In a recession, people employed for the right reasons and with the right intentions to do good, can be positively motivated to complete other work to help the business survive. These people also add value by already knowing the business’s customers, suppliers, operating systems and where efficiencies can be gained. This knowledge is worth dollars in the bank to your business and is gold in the hands of your competitors. The importance therefore of managing these people through tough times cannot be overestimated.

This concludes the fourth key factor; cash protection. After a short break we will review the next key factor, the right suppliers.

Episode 6 – 5th Key Factor – The Right Suppliers

In conjunction with your other survival strategies, reviewing your supplier list is essential. Like any other business input, you need a level of comfort that the suppliers will do the right thing by your business. Accordingly, the two most important factors you need to cover are due diligence and your suppliers’ flexibility with delivery and payment options.

Completing due diligence on your suppliers will be more important than ever before. Operating a business in the future will become far more complex than just buying the right product or service. Today, there is the social element, commitment to quality, operating ethically, plus government regulations and legislative factors to consider. These factors and the advent of social media have added a complexity to operating a business not seen in the past. Just because we are heading into a recession, you cannot afford to neglect these issues if you wish to survive for the long term.

Obviously the first place to start the due diligence process is with reputation. For instance, does your own business have a good reputation? The factors of concern will be whether your business pays on time, have good communication channels with its suppliers and raise valid credit claims, or ones which are designed to delay payments. In other words, is your business a good customer?

In the case of the supplier, what does your due diligence reveal about their ability to be a valued supplier, or are they going to be a costly nightmare to deal with in the future. In the future, due diligence on your suppliers will be essential, after all, nothing will be the same. It would be foolish to believe otherwise.

In completing your due diligence exercise the following questions, amongst others, are worth asking for any new supplier or when existing suppliers stop supplying goods and services as expected.

  • What is the reputation of your supplier’s management, employees and directors?
  • Where does the supplier obtain their goods from and/or their service providers?
  • Equally important, is the supplier willing to provide information on their suppliers and confirm the quality of the goods and services supplied?
  • Will the goods and services be delivered in a timely manner or as required?
  • Can the supplier be relied upon to deliver special orders if required?
  • Does the supplier have a policy of helping your business by allowing agreed part payments over a period to help your business with a special contract or project?
  • If goods and services cannot be supplied as required, is the supplier upfront about their inability to deliver the goods and services?

As we enter a recession, you need to have some comfort that your business will be supplied with the goods and services required to stay in business. Furthermore, you will want to try and ensure that the products you order are sourced from reputable suppliers. Currently how you operate your business is more important than ever before as it will be scrutinised by the general public. It is wise to remember, there are no secrets anymore and you do need to be on your best behaviour, if you wish to survive in the long term.

This concludes the fithy key factor; suppliers. After a short break we will review the next key factor, the right customers.

Episode 7 – 6th Key Factor – The Right Customers

Customers can make or break your business. This opening statement may sound trite, but is the truth.

We are now entering a new business paradigm where the focus must always be this question “What is in it for our business?” Focusing principally on customer needs to the exclusion of your business’s welfare, means the customer gains preferential treatment in the discussion on how you operate your business. Don’t forget, without cash and profits, plus customers, the business does not survive.

In the past, many business people focused on what their customer wanted, only to find out, the customer still did not buy. Furthermore, even if the customer did buy, they often did not pay within terms, despite signing agreements to do so, refused to pay at all, wanted another discount, were uncooperative, or expected you to fund their businesses.

From now on, finding and keeping the right customer is everybody’s responsibility within the business, NO EXCEPTIONS. In the new business world it is this emphasis which will be a major factor in survival.

Identifying the right type of customer means you will focus on; making a profit, or at least breaking-even, or identifying whether there are any other real benefits. No longer will the wishy-washy feel good statements from management and sales be acceptable. If you cannot quantify the cost-benefits in dollar or business terms for keeping an unprofitable customer, then you continue to risk going out of business.

To identify the right type of customer, you also need to understand the words used with your customers. These three examples will give you an idea on the importance of words.

Potential – suggests you should run for the hills and tell the customer to go elsewhere. Too often this word has led to the destruction of value to the supplier. In the coming months and years, potentially more businesses will go out of business than at any other time since the 1930s great depression.

In truth however, it is probably worth completing an honest due diligence review of the customer’s proposal, if they have been a good customer in the past. The emphasis is however on the words “honest due diligence review”.

No, is one the most under rated words for successful selling. If the customer walks away without asking why, or with a snide comment like “… well I will just buy from your competitor”, in my view that is perfect. Your business has probably just saved a lot of money.

“We will pay you when they pay us!” is usually used by the customer after the goods or service has been supplied and is rarely stated upfront. If you think about these words, essentiality the customer is saying they reserve the right to “…never pay you.” Dealing with these customers is another sure-fire way of going out of business.

Finding and keeping the right type of customer will not be easy in the future. It will also be a lot of hard work. If you get it right however, you stand a chance of winning the long-term game and surviving the recession.

This concludes the sixth key factor; the right customer. After a short break we will review the next key factor, technology and cyber protection.

Episode 8 - 7th Key Factor – Technology and Cyber Protection

Increasingly businesses need to use the best technology available for their type of business and practice first-class cyber protection hygiene.

Most people think when we talk about using technology in business, it will:

  1. be cheaper and more efficient than employing people;
  2. require less people in the business;
  3. make our business more efficient;
  4. be acceptable to all the business’s stakeholders; and
  5. replacing the technology with updated versions will be risk free.

The truth to these thoughts is often far different in practice. The reality in fact, is that you have swapped one form of problems for another set of problems. We are also finding these newer problems are no easier to fix than the older problems, and often some of these problems are unfixable.

One of the best places to test the effectiveness of the technology versus people equation, is in your accounts payable and receivable functions. Whilst there are been tremendous improvements in the efficiency of a number of functions, in other areas, liabilities and problems are increasing.

Over the last 15 years I have been extremely lucky to practise my profession in both local and global business environments. In that time, certain truths have become evident. The practice of cash protection and collection has been assisted greatly when technology is used properly to enhance traditional disciplines and processes.

Unfortunately, technology has often been used to achieve other managerial objectives. As a result, and with the respect of the professional and experienced employee marginalised, the result has been less successful. In fact, I would go so far as to say, today many of the businesses which have taken this second approach, can no longer calculate their total liabilities or loss of cash.

In turn, particularly for this second group of businesses, the protection of the business is now compromised when it comes to cyber protection. It is really difficult to practise good cyber protection hygiene when second rate technology, cheap employees, outsourcing and business disciplines are the ethos of your business decision making.

There have always been fraudsters, slow, difficult or manipulative customers, bad suppliers, poor management and cheap or disenfranchised employees as part of business equation. Now with the overuse of technology, coupled with poor employment practices, cybercrime is now another factor all businesses have to manage. As the technology experts keep telling us; “… it is not if cyber criminals will attack your business, it is when!”

To use the best technology and employ good people within your business has always been important for business success. If you wish to survive this recession, these two business inputs will be even more important. With the current risk from cybercrime, good cyber protection hygiene is only possible with the support of these two factors.

This concludes the seventh key factor; technology and cyber protection. After a short break we will review the next key factor, business disciplines.

Episode 9 8th Key Factor - Business Disciplines

The benefits of maintaining good business disciplines can be seen in the positive performance results of your business. For instance, a positive business decision could be; not to deal with suspect or dodgy suppliers whose products may cause problems in the future.

In tough times, cheaper goods and services always look good at first. The cost of defective products, loss of reputation, fixing problems later on, soon make the initial purchasing decision and lack of due diligence awfully expensive.

Unfortunately, when business discipline is mentioned, it is all too often treated in an emotional and negative manner based on the upfront cost, that it will cost sales, or a fear of missing out on a great deal. What is rarely mentioned in a calm and measured manner, are the dollars and reputation lost due to an undisciplined act.

In the coming recession, the first effect of previous poor business disciplines will soon be seen in bad debt write-offs, or when your business is hit by claims for compensation due to negligence of product or service delivery. Many of these losses may have been avoided with a focus on a disciplined approach when buying the goods or using service providers.

Moving forward, when the recession really has a grip on the business environment, business disciplines will play an important part on whether your business is forced to close, survives, or grows into a better business. Good business discipline is based on both historical business norms plus proper due diligence in the current business environment. In the future, a greater degree of risk or a reduction of anticipated profits may have to be factored into your decision making in order to survive.

In a recession period unfortunately, good business disciplines are often marginalised or ignored in the false hope that will assist the survival of the business. The outcome is usually the opposite. The areas of greater risk where business disciplines should not be forgone or marginalised therefore are:

  1. dealing with risky, bad paying, or new customers;
  2. ignoring the red flags of problematic behaviour with new or existing customers;
  3. allowing debt owed to drift out;
  4. failing to confront problems with debt owed to suppliers and financiers;
  5. dealing with less reputable suppliers;
  6. employing cheaper or less professional employees;
  7. ignoring employee observations and suggestion on dealing with customers and suppliers;
  8. picking up the telephone and talking with customers and suppliers about problems;
  9. taking over a competitor or moving into a different marketplace, etc.

Strong business disciplines are always important, but never more so than in a recession. It is surprising when your business actually adheres to strong disciplines how often you see the benefits. In addition, a non-monetary benefit of good business disciplines frequently ignored is peace of mind. It is really difficult to concentrate on surviving in a recession when your mind is cluttered by problems caused by bad decisions, or by poor business disciplines.

This concludes the eighth key factor; business disciplines. After a short break we will review the next key factor, your business model.

Episode 10 9th Key Factor – Your Business Model

There is only one objective for creating a business model and that is to help you make enough profit to survive and protect your business assets and investor’s contribution. Any business model which does not achieve this profit requirement needs to be changed. Unfortunately, often modifying your business model is like trying to turn around a battleship. It is almost impossible in the short term.

The problem with most of the business models is they are welded into management’s possessive thinking and ownership. When this occurs, management fights tooth and nail to keep the model going, even when their model is not working. In many other cases, even if the business model does appear viable, many profitable opportunities are still lost due to their lack of flexibility.

It would appear that a recession is now unavoidable and when the immediate COVID-19 crises period is over, nothing will be the same. Already we are seeing the evidence of the unsustainability of previous business models at this early stage of the virus–recession period. When the next business period comes about, many current business models with be found deficient.

The problem of business model rigidity and management’s lack of flexible thinking is also seen in the immediate period of the COVID-19 virus restrictions. Many businesses were so unprepared because they did not appear to have made any provision for risks in their current model. As a result, many dollars and much time has been lost which will never be recovered.

It is not my intention to prescribe what business model might work in the future as there are so many variables and time does not permit. The right business model for your business can only be crafted by you to meet your specific requirements.

If the above information suggests the concept of business models is invalid, that is not my intention. Business models do have a value at all stages of the life of your business. In the first instance, preparing a business model with full diligence and SWOT analysis is a useful exercise. This is the starting point for your business. If you prepare your model honestly, this will help you to understand whether the more aspirational concepts of your model are likely to be practical.

As your business progresses, you will find out whether your objectives were achieved. From there you can plan the next stage. As you progress through each stage and business model, you come to learn what works and what doesn’t, or what might be changed to work better for your business.

The one thing you must never do, is to hold your business model to be the end game of running your business. It isn’t as it needs to be constantly reviewed for relativity. Herein lies the problem and probably the hardest thing to reconcile. In developing and working to your business plan, it becomes an emotional component of who you are because of your investment. If you can let go of the emotional bit however, by changing, it may help you develop the best business plan for your business.

This concludes the 9th key factor; business model. After a short break we will review the last key factor of our feature, legally putting your competitor out of business.

Episode 11 10th Key Factor – Legally Putting Your Competitors Out of Business

There is no honour, or social kudos in putting your competitor out of business illegally. There may even be negative financial and legal implications if you have acted illegally.

Does that mean there are no other means to put your competitor out of business? Of course not. For instance, it is not your fault if your competitors operated improperly over the years and as a result, they go out of business.

It is also perfectly legal and practical, particularly as the recession proceeds, to want to see your competitors go out of business. After all, the number of your respective customers will likely decrease and the fewer competitors you have, the greater chance you have of making a sale. Now, I am not suggesting you deliberately target your competitors. Your primary focus must always be on survival and growth. Focusing on deliberately eliminating one or more competitors means you are not focused on your major objective of staying viable.

To make life more difficult for your competitors legally, starts with giving your customers every opportunity to stay and few opportunities to leave. To achieve this objective, you will need to operate a customer friendly and mistake free business. The means to achieve this situation includes:

  1. never underestimating the power of CASH;
  2. operating with one eye on profits and the other on social accountability;
  3. learning the “Art of Business” which includes understanding that NO is not the end of the sales conversation, it is part of the process and making some profit is better than no profit;
  4. maintain good business disciplines to reduce mistakes, maintain due diligence and hold people accountable for their decision making;
  5. create a great business team, because the real enemy is disharmony within the business;
  6. educating all your employees to be the best they can be;
  7. employ salespeople that are salespeople not just order takers and employ credit and accounts people to promote your business at every opportunity;
  8. employ people experienced in the real world of business;
  9. try to encourage slow payers to become better payers and get rid of unprofitable customers by sending them to your competitors; and
  10. if previously unprofitable customers return, give them a chance to become profitable again.

If you work on eliminating the weaknesses, maintain business disciplines and create a profitable sales ethos, then you have a chance of keeping every profitable customer. If this objective is achieved, you can perhaps stay in business by robbing your competitor as a by-product of operating profitably and sustainably.


The 10 key factors presented in our mini-blog series are designed to help you stay in business by operating and selling profitability throughout the recession. There are no guarantees in business at any time. During a recession, it will be even more difficult than the “old normal”. Much of the information in this series has been based on tried and true business practices over the years, many of which have been ignored in recent times.

The way forward to a “new normal” will therefore involve reinstating the best of the tried and true practices of the past, coupled with the best technology tools and practices of today. Get the process right and there is every chance, your business will survive the recession. Better still, you will more than likely come out at the other end with a stronger and better business.