When business gets tough, the instruction usually arrives quickly: cut costs. Too often, nobody distinguishes the fat from the muscle before reaching for the knife.
If interest rates rise again as many are forecasting, while demand weakens, that reflex will become harder to resist. But surviving a downturn requires more judgement than taking a few percent off every budget item and hoping for the best.
Waiting for Canberra to sort out productivity, investment and the policy uncertainty facing business offers little comfort. Whatever politicians promise, you still have wages to pay, rising rent and insurance, and customers to keep.
The useful question is how to put your business in a position to invest while competitors retreat. That starts with making each dollar work harder by reducing waste, rather than assuming you must spend fewer dollars.
Customer service is often high on the chopping block. AI might reduce the time people spend by automating information retrieval, initial response to tactical sales activity, drafting routine replies and completing administration. However, saved time delivers nothing by itself. Someone must turn that capacity into fewer lost customers, a larger share of their spending, or sales to new customers, while checking that the technology does not create mistakes that consume the saving.
Marketing deserves the same scrutiny. Cutting activity that produces little commercial value makes sense; cutting effective activity may weaken the sales pipeline precisely when you need it most. When competitors retreat, you have an opportunity to gain attention, build mental availability, and create momentum that generates revenue as times improve. That does not justify doubling the budget on faith: the offer, audience, margins and time required to recover the investment still matter, but it is a recurring opportunity usually dismissed as an opportunity to reduce costs rather than maintain investment in the future.
All of this requires cash, which brings us to an opportunity that attracts far less attention than another round of cuts.
All businesses already have cash within reach, the challenge is to see and retrieve it. That cash is sitting in finished goods inventory, on customers shelves, in unfinished jobs, in customers’ bank accounts, and ignored opportunities to optimise operations.
I call the process of releasing it ‘cash optimisation’, which usually involves fixing ordinary operating habits that have become misshapen, misaligned, flabby, or just geriatric and deserving retirement.
Start with a comprehensive audit of working capital, never forgetting that customers will not forgive you if you trade working capital reductions for their value delivered. The basic equation that will deliver a working capital number is:
Receivables (debtors) + inventory (raw material, WIP & finished goods) – Payables (creditors). These are the main trading components of working capital, and they reveal how much money you have tied up between buying, selling and collecting. What it does not count is time, the missing but vital dimension. How long does stock sit before you sell it, how long do customers take to pay, and when must you pay suppliers?
Start with the invoices. Send them promptly, get the details right, resolve disputes quickly and follow up overdue accounts before neglect becomes usual. Replacing the old practise of sending statements is the tactic of sending polite payment reminders a few days before the due date.
Then look at inventory and unfinished work. Slow-moving stock, oversized purchasing batches, WIP, redundant subscriptions, and supplier terms all absorb cash without helping you serve another customer.
Supplier terms deserve detailed attention, but negotiation beats simply paying late. Note that passing your cash problem to a supplier via late payment is usually taken a sure sign that you are in trouble, which can damage the relationship and put future deliveries at risk.
None of this means stripping stock to the bone or making life difficult for good customers. A stock-out that stops production or loses a valuable account can cost far more than the cash you release.
Nor does turning an overdue invoice into money in the bank automatically improve your return on capital employed. The opportunity comes from sustaining the business with less capital tied up, reducing borrowing where appropriate, or putting released funds into investments that earn a worthwhile return.
Before cutting again, examine where cash stops moving through your business and why. You may find that the next investment needs a better operating discipline before it needs a bigger overdraft.
