1. Lesson 24
Managing Resources in Turbulent Times
‘Recessions are a period of opportunity…During recessions, large companies abandon
marginally profitable customers and small businesses can get those customers. And recessions
are healthy. They reward a history of fiscal responsibility. They discipline the economy for its
excesses. And the great thing about recessions is, they end.’ Pearce.
There are various fundamentals businesses can focus on during these times?
• Fundamentals that cause success don’t change.
• Turbulent times can help businesses to focus and have a time of pruning
• Utilising whatever cash available to preserve wealth by building asset side of balance
sheet
• Reducing expenses side of income statement
• Reducing costs created by liabilities side of balance sheet
In this lesson we show how this can be achieved by embracing a 4 pronged approach of
1. Strategic Cost-cutting
2. Cash-flow Management
3. Revenue Preservation Strategy
4. Maintaining High Staff Morale (see lesson on Motivation)
I. What are some of the challenges in South Africa’s Economic Foundations
It’s important to note that these factors are typically of many developing countries around the
world.
A. Consumerism
Too much spending and too little saving over last 20yrs.
B. Credit dependency
No delayed gratification. Spending money you don’t have to buy what you don’t need.
C. Weakening infrastructure
Infrastructure not growing fast enough for economic growth.
D. Implosion
Same power, medical, water systems as 10 yrs ago for much bigger economy
1. Rich/Poor Gap Widening
2. Fewer are carrying economy
3. Tax regimes
4. High cost of utilities
5. High social taxes
E. Weakening educational infrastructure and skills base
The global economy is largely built on information and knowledge. South Africa and
other developing nations need to start adding value to raw materials. All of this has an
impact on
• Brain drain to more competitive markets.
• Inflation
• Infrastructure
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2. • Poverty alleviation
• Crime
F. External Factors
II. What does the bible instruct about resource management?
A. Maintain a correct perspective of riches (Rev. 3:18; Prov. 22:1-4).
Rev 3:18 I counsel you to buy from Me gold purified by fire, so that you may be rich;
and white clothing, so that you may be clothed, and so that the shame of your nakedness
does not appear. And anoint your eyes with eye salve, so that you may see.
Prov. 22:1-4 A good name is rather to be chosen than great riches; and loving favor
rather than silver or gold. The rich and poor meet together; Jehovah is the maker of them
all. A prudent one foresees the evil and hides himself, but the simple pass on and are
punished. By humility and the fear of Jehovah are riches and honor and life.
B. Do not love money (1 Tim. 6:10).
It’s important to remember that you can have a lot of money and not love it and having
little money does not mean you do not love the little you have.
1Ti 6:10 For the love of money is a root of all evils, of which some having lusted after,
they were seduced from the faith and pierced themselves through with many sorrows.
C. Trust in God and see Him as your source (Mark 10:17-21; Prov. 3:5-10; Phil 4:19).
Mar 10:17-21 And when He had gone out into the way, one came running up and
kneeled to Him, and asked Him, Good Master, what shall I do that I may inherit eternal
life? And Jesus said to him, Why do you call Me good? No one is good except one, God.
You know the commandments: Do not commit adultery, do not kill, do not steal, do not
bear false witness, do not defraud, honor your father and your mother. And he answered
and said to Him, Teacher, all these I have observed from my youth. Then Jesus,
beholding him, loved him and said to him, One thing you lack. Go, sell whatever you
have and give it to the poor, and you shall have treasure in Heaven. And come, take up
the cross and follow Me.
Pro 3:5-10 Trust in Jehovah with all your heart, and lean not to your own understanding.
In all your ways acknowledge Him, and He shall direct your paths. Do not be wise in
your own eyes; fear Jehovah and depart from evil. Healing shall be to your navel and
marrow to your bones. Honor Jehovah with your substance, and with the first-fruits of all
your increase; and your barns shall be filled with plenty, and your presses shall burst with
new wine.
Php 4:19 But my God shall supply all your need according to His riches in glory by
Christ Jesus.
D. Honour the Lord with your substance (1 Chron. 29:2-10; Luke 21:1-4; Prov. 3:9-10).
1Ch 29:2 -10 And I have prepared with all my might for the house of my God the gold
for things of gold, and the silver for things of silver, and the bronze for things of bronze,
the iron for things of iron, and wood for things of wood, onyx stones, and stones to be set,
and also stones of antimony, and stones of many colors, and every precious stone, and
stones of alabaster, in abundance. And also, because I have delighted in the house of my
God, out of my own treasure of gold and silver I have given to the house of my God over
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3. and above all that I have prepared for the holy house, three thousand talents of gold, of
the gold of Ophir, and seven thousand talents of refined silver, to overlay the walls of the
houses; the gold for things of gold, and the silver for things of silver, and for all kinds of
work by the hands of skillful workers. And who is willing to consecrate his service this
day to Jehovah? And the chiefs of the fathers, and the rulers of the tribes of Israel, and the
commanders of thousands and of hundreds, with the rulers of the king's work, offered
willingly. And they gave for the service of the house of God five thousand talents of gold
and ten thousand darics, and ten thousand talents of silver, and eighteen thousand talents
of bronze, and one hundred thousand talents of iron. And he who had precious stones
gave to the treasury of the house of Jehovah by the hand of Jehiel the Gershonite. And the
people rejoiced, because they offered willingly, because with perfect heart they offered
willingly to Jehovah. And David the king also rejoiced with great joy. And David blessed
Jehovah before all the congregation. And David said, Blessed are You, Jehovah, the God
of Israel our father, forever and ever.
Luk 21:1-4 And looking up, He saw the rich men casting their gifts into the treasury.
And He also saw a certain poor widow casting two lepta in there. And He said, Truly I
say to you that this poor widow has cast in more than all of them. For all these have cast
in to the offerings of God from their abundance, but out of her poverty she has cast in all
the living she had.
Pro 3:9-10 Honor Jehovah with your substance, and with the firstfruits of all your
increase; and your barns shall be filled with plenty, and your presses shall burst with new
wine.
E. Acknowledge the real value of your money (Leviticus 27:25).
Lev 27:25 And all your judgments shall be according to the shekel of the sanctuary,
twenty gerahs shall be the shekel.
F. Don’t make riches your goal (1 Tim. 6; Prov. 23:4-5).
Pro 23:4-5 Do not labor to be rich; cease from your own understanding. Will your eyes
fly on it? And it is gone! For surely it makes wings for itself; it flies into the heavens like
an eagle.
G. Think ahead, take initiative and be diligent (Prov. 6: 4-11).
Pro 6:4-11 Do not give sleep to your eyes or slumber to your eyelids. Deliver yourself
as a gazelle from the hunter's hand, and as a bird from the hand of the fowler. Go to the
ant, sluggard; consider her ways and be wise; who, having no guide, overseer, or ruler,
provides her food in the summer and gathers her food in the harvest. How long will you
sleep, O sluggard? When will you arise out of your sleep? A little sleep, a little slumber, a
little folding of the hands to lie down; so shall your poverty come as one who travels, and
your need like an armed man.
H. Give to the poor (Deut 15:1-18; Prov. 19:17).
Pro 19:17 He who has pity upon the poor lends to Jehovah, and He will reward his
dealing to him.
I. Beware of the bondage debt may bring (Prov 22:7).
Pro 22:7 The rich rules over the poor, and the borrower is servant to the lender.
J. Beware of the temptations associated with both wealth and poverty (Prov. 30:7-9).
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4. Pro 30:7-9 I have asked two things from You; do not deny them before I die; remove
far from me vanity and a lying word; give me neither poverty or riches; tear for me my
portion of bread, lest I be full and deceive, and say, Who is Jehovah? Or lest I be poor,
and steal, and violate the name of my God.
K. Be a faithful steward of what you currently have (Mt. 25:28-30).
You might end up enjoying the benefits of reverse wealth redistribution.
Mat 25:28 -30 Therefore take the talent from him and give it to him who has ten talents.
For to everyone who has, more shall be given, and he will abound. But from him who has
not, even that which he has shall be taken away from him. And throw the unprofitable
servant into outer darkness; there shall be weeping and gnashing of teeth.
L. Maintain a generous disposition (Acts 20:35).
Plan your giving and not just your getting.
Act 20:35 I have shown you all things, that working in this way we ought to help the
weak, and to remember the words of the Lord Jesus, that He Himself said, It is more
blessed to give than to receive.
III. How can a small business cut costs and increase revenue?
A. Medium term cost-cutting.
1. Spend cash on things that reduce costs
e.g. telephone monitoring, vehicle tracking, appraisal systems to enhance productivity.
2. Embrace industry specific guideline ratios e.g. cost-revenue ratios
3. Spend on necessary research and development to help to adjust to recession
environment products
4. Spend less on overheads and shift to direct costs
B. Long-term measures
Assess long-term loans and leases etc to see how to lower them.
C. A culture of cost-cutting
1. Celebrate it and reward it
2. Ask 3 or 4 times WHY before spending
3. Ask how spending will increase productivity, reduce costs or increase
revenue
4. Staff right-sizing while being aware of demoralisation and legalities
D. Revenue maximisation strategies.
1. In short-term focus on quick turn over products and services e.g. cash products.
2. Short-term revenue cycle (e.g. from 30 days to 14 days).
3. Provide Incentives for sales team to push these products.
4. Introduce prepaid products.
5. In mid-term consider diversifying products, customers even country (export).
6. Keep an ear for emerging opportunities whilst being careful of short-term fads.
7. Remember that recessions end so stay focused on your long-term goal.
IV. How can small businesses develop effective cash-flow management?
The objective in recession is to remain cash-flow positive. It’s important to remember that you
can be in book profitability but still shut down due to cash-flow problems. Essentially, cash-flow
management is about collecting money faster than you pay it out. The presence of cash in your
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5. business can be the make or break of your business. Hence, we have outlined below various
ways in which small businesses can develop an effective cash-flow management culture.
A. Make use of market related bank accounts.
Make use of market related accounts for surplus cash and build your savings portfolio
B. Require payment sooner, upfront or even in advance.
C. Request for a deposit.
D. Allow clients to use credit cards.
.
E. Don’t pay sooner than you have to.
Pay on time but if you are given 30 days then why not take advantage of the free loan so
that you have the benefit of your cash longer.
F. Make sure your invoices are correct.
Errors on invoices take up a lot of unnecessary time and result in payment delays.
G. Invoice upon delivery as opposed to using a set schedule.
H. Bill more often.
I. Give discounts for prompt payments.
J. Maintain a live cash-flow at all times.
This is an estimation of your company’s cash position at a given time.
K. Get to know your clients’ accounts departments.
L. Manage your expenses.
M. Manage you accounts receivable.
Acknowledgements:
Section I & III of this lesson were adapted from Dumi Nkala’s unpublished research notes on
“The State of the Economy” – 2008.
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