Credit Matters

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Recession Review to Date – What was Observed and Should be Learnt

Kim Radok22 July 2020

The recession has finally been declared, although it was in effect pending for some time. It is now a good time to reflect on what has happened since people accepted there was no escaping the recession. A brief explanation of what has been observed follows.

Risk Management was largely ignored by management in a majority of organisations as evidence by their lack of savings, continued reliance on cheap debt, plus a failure to collect outstanding or pay existing debt.

It has been simply unbelievable how so many businesses had no retained earnings to even last three months of poor sales, or no business at all. In some cases, the closure of the business was unavoidable and sensible. We have also seen the number of iconic names and brands, major corporate businesses and sporting organisations, already in trouble or closed down, which is troubling.

Did so many business owners, professionals, or management teams really not see and plan for the coming recession?

Business Models which were basically unsuitable for any adverse business conditions have been found wanting. These businesses relied upon:

  • cheap debt to survive and grow the business quickly:
  • technology which only provides tools for business and like any other tools, if it is the wrong tool, increases costs;
  • ignoring the fact that technology does not own money and does not buy anything;
  • using unprofessional and untrained employees;
  • outsourcing the protection and management of cash to mercenaries;
  • ignoring inefficiencies which cost money to repair without increasing profit, etc.

Working short staffed which reduced organisation efficiencies, increased costs and in time, makes the quality work of professional employees look over time, substandard.

Thinking and acting negatively instead of positively means opportunities to grow the business were lost. Instead of standing out in the crowd and offering a point of difference, your business descends into the crowd and in time, is lost from view amongst is competitors.

It is perfectly understandable to be emotionally affected when you realise the recession is now unavoidable. As a business owner, professional, or manager, to allow this negativity to last for anything longer than a few days, actually hinders seeing any of the positives which oalways occur in a recession.

When thinking negatively, actions are taken in the belief that the effects of the recession have already arrived. Whilst this is true for a number of businesses, the majority of the negative effects for most other businesses are still to be experienced. The fact is, that the real effects of the recession will not be noticed for another three to 12 months. This is time which can be used to your advantage but is lost due to negative thinking.

If business people can quickly overcome any negativity, they can look for the positives which are still possible in a recession. After all, as the fat lady sings, “It ain’t over until it is over”. Perhaps in in the next three to 12 months, circumstances may have changed and:

  • your business was one of the few survivors and has gained more customers because a number of your competitors have gone out of business;
  • a government initiative or grant has been offered;
  • new products become available;
  • “real” in-house efficiencies have been found;
  • an “angel investor” or crowd funding campaign has helped secure the business financially, etc.

In conclusion, we are in for some hard times in the future and the world has changed because of the recession. If you think negatively about the future, as many will do, then you miss the opportunity of perhaps saving and even growing your business. Even during recessions, business does not stop entirely and there are always opportunities to survive and grow. Being positive ensures you will be able to “see” the opportunities which occur in every recession.

Further information can be found in these two features, “The Anatomy of a Recession” and “What will the future look like in 2020 for B2B Credit?”, which can be found at www.creditmatters.com.au, or you can contact Kim at kim@creditmatters.com.au for a confidential discussion of future possibilities.

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