Hard times like this: Part 1 ...

In a difficult and challenging economic situation, whatever the reasons, there is an indeed a moral obligation, for organisations to reach out and help relief the economic burdens of the citizens of the Country to the best of their abilities.

There is uncertainty as to when this economic plight would come to a landing.

Malaysian consumers are burdened with price hikes for almost all of their basic needs with the introduction of  GST (Good & Services Tax) in April 2015. They are now more careful and selective in their spending. There is an erosion of their purchasing power. Many are now "buying when necessary and in smaller quantity", resorting to more "eating at home" and taking other measures to stretch and conserve their dwindling ringgit.

The business community is also facing difficult moments with revenues affected with the weakening of the Malaysian Ringgit against major trading currencies. Their cash flow is also affected with the  introduction of GST (Good & Services Tax) in April 2015.

The Country's economy is no better with low crude oil and commodity prices.

On the whole, everyone is adversely affected.

To be sustainable, importers and domestic businesses, must be able to generate adequate revenue, with decent profit margin, to keep afloat until the worse is over. The following, general and basic action plan, not exhaustive, could be adopted either singly or otherwise, on a temporary basis until a more permanent or better solutions be found:

1) business must absorb some incremental cost and thus accept a lower profit margin. If absolutely necessary, have a minimal price increase as well.
2) negotiate with foreign Suppliers for lower cost of goods to tie over this difficult moment. Or offer more "free goods" or price discounts with purchases.
3) review your other purchases of goods and services for efficient inventory and pricing control eg stationery, logistic deliveries
4) negotiate to share cost with your local trade partners by lowering their profit margin.
5) reduce or discontinue samples, free goods or bonus to your trade partners
6) get professional advice on hedging your purchases. Get close to your Bankers.
7) get additional financial facilities from your Banks if you have to.
8) improve on your account receivables ie reduce credit days. This will improve liquidity and reduce bank borrowings in order to enhance financial  performance.

Laying staff should not be in the equation. In fact they are great assets to help you go through this period of uncertainty. Effective leadership is the key to drive business continuity.

/06-11-2015

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