Face up to the reality of your situation

When things get tough, it's crucial to know exactly what you are facing and not to bury your head in the sand. Prepare up-to-date figures for your business's cash flow, profit and forecast for the future.

Things may not be as bad as you think, but you need to be realistic about what needs to change. Once you know the size of the problem you can think more clearly about how to change it.

Be open to new ideas

Just because a formula has worked for your business in the past it doesn't meant it's the best one in the current financial climate. Look at your business plan and revise it if necessary.

Rethinking your approach could lead to new and more productive methods of working, new products, new customers and markets, and new ways of doing business in the future. This may ease the pressure now and put your business in a good position for when the economy begins to recover.

Keep in touch with your bank

It is important to keep your bank fully informed of what's going on in your business and the decisions you are taking. Make good use of your relationship with your bank manager/adviser and use their knowledge and expertise to help you plan the future.

Know your bottom line

Cash flow is vital to any business and so you need to look at it in detail. Monitor money in and out of your business on a weekly, or ideally daily, basis, and look at ways to boost your incomings and reduce your outgoings.

Ask yourself:

• Could your business be more energy efficient to save on utility bills?
• Are you managing your stock cycle as efficiently as possible? Could you reduce the stock you carry, or clear out old dead stock?
• Do you have too many staff? Could any work be subcontracted out as and when necessary?
• Are you spending on things that don't really make a difference to your business, for example stationery, transport, water coolers, couriers, magazine subscriptions?

Look at every part of your business to see if you could save money. Similarly, make sure you are being paid on time, chase unpaid invoices and stop dealing with people who don't pay.

Be proactive

Now is not the time to sit tight and hope your problems will go away.

• Check with your accountant or bookkeeper that they are optimising your position when it comes to paying VAT and tax.
• Think about your business assets and whether you are using them to their full potential. Could you sub-let desk, work or storage space? Could you diversify or offer a new or improved service, for example could you deliver or deliver at more convenient times than your competitors?
• Look to renegotiate contracts with suppliers.
• Talk to your landlord to see if you can renegotiate your rent (if applicable).

Stay in control

Don't panic and let things drift. It's vital for the future of your business that you stay in control and know what is happening in every part of the business.

Who can help?

All small and medium-size businesses should use the services of professionals such as bank managers, accountants, solicitors and tax advisers. All of these people can provide valuable support and advice from their specialist perspective to help keep your business on track.

Further sources of advice and guidance include:

• Business Link
  The Government's small business advice and support service is free. Business Link also offers tools to help carry out a business health check.
• The Federation of Small Businesses
  The FSB is a membership organisation offering support, information and advice to small businesses.

Whilst every effort has been made to ensure that the information given is not misleading, this material is provided only as part as an overview of the subject (at the time of publication ) and is not a substitute for specific professional advice. No responsibility can be accepted by Bank of Scotland for any loss or liability occasioned by any person acting or refraining from action as a result of the contents of this guide.

The provision by us of a website address is not evidence of any endorsement by us of the material held there. We accept no responsibility or liability for the privacy of your personal information on such websites, as these are beyond our control. We will accept no responsibility or liability in respect of any materials on any website that is not under our control.

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