Monthly Archives: December 2014

Managing Finance during recession

 

After the world trade increased and several countries opened up their market, since then the global economy has faced several booms and surges and whenever there is a dip, the problems would be devastating with stock markets crashing, millions of people losing jobs, becoming paupers overnight, Govt. becoming bankrupt and such adverse economic effects.  The recent global recession which began in US was one of such incidents.

No manager would have expected the recession that rocked US economy in his wildest dreams. The effects of the depression are now slowly receding into history and the economy is showing signs of progress with business volumes and international trade picking up slowly but steadily. The biggest challenge for any organization will be to manage its finance during a recessionary period. It is quite possible all or at least a majority of the debtors to have gone bankrupt. Business would have dried up since domestic demand would have fallen drastically hitting all forecasts of sales revenues.

To handle finances efficiently during recessionary period all that a manager has to do is to ensure that only necessary and warranted expenses are spent for. Luxuries are to be hived and the organization should adopt a lean system of management where waste is negligible and financial transactions are carried out with maximum credit period available. It will also be wise to revise the credit period allowed to debtors as longer debtors collection period would result in a bigger risk of accumulating bad debts. Further, the organization should also consider scaling down its operations where it produces just enough inventories to meets its existing demand without stepping out of its comfort zone. One thing is people should not compromise on their basic survival needs and expenses for that and spending for it will help the economy to revive on its own.