Millions of households are facing a rise in energy costs, alongside increases in the cost of council tax, water bills and other utilities and there is a warning of fresh energy bill price rises in October. Energy prices have been affected by the Ukraine war and pressure on suppliers. There are continuing delays and shortages on a wide range of goods businesses need to function properly. In addition, the National Insurance rise is now hitting pay packets, an additional cost to both employers and employees.
Is it all doom and gloom or can you plan forward and make adjustments in and to your business to factor in these changes?
Our experience is that business owners are a resilient group and those that are the most successful are also flexible in their planning. Here are some of our recommended actions, based on what we have seen other clients doing recently to firm up their resilience to these tough times:
- Review your budgets and set realistic and achievable targets for the remainder of 2022 and know your cash flow forecast inside out.
- Make sure your records are accurate and up-to-date. This is essential for tracking your business performance and making sound financial decisions.
- Understand your business profit and loss statement. This document shows how much money your business has earned or lost over a specific time period.
- Review your balance sheet regularly. This report shows your company’s financial standing by summarising your assets, liabilities and equity.
- Keep an eye on your cash flow. Monitoring your cash flow helps you make smart decisions about when and how to invest in your business.
- Get your team involved in a discussion of likely trading conditions and get their input on reducing costs and maintaining revenues.
- Get rid of ‘won’t pay’ customers.
- Review your debtors list and chase up overdue invoices (if appropriate). If applicable, offer existing debtors extended payment terms and/or discounts.
- Make sure your terms of business contain explicit payment terms.
- Assign responsibility to one individual for invoicing and collections.
- Put extra effort into making sure your relationships with your better customers are solid.
- Review your list of products and services and eliminate those that are unprofitable or not core products/services.
- If possible, agree extended payment terms with suppliers in advance.
- If appropriate, review banking facilities and discuss future needs.
- Don’t ignore debt. Ask for help if you are struggling.
- Know what you are spending and on what. Look at your detailed expense list in your profit and loss account and assess if there is room for negotiation in any of your fixed expenses and/or whether there are alternative suppliers.
- Look at your expenses and see if you can make small cut backs in lots of areas. Use ‘bottom up’ budgeting where everyone in the office gives input on areas over which they have control – target a 10% cost saving.
- Review and flowchart the main processes in your business (e.g. sales processing, order fulfilment, shipping etc.) and challenge the need for each step.
- Encourage team members to suggest ways to streamline and simplify processes (e.g. sit down and brainstorm about efficiencies and cost reduction).
- Review your staffing needs over the next few months.
- Establish your key performance indicators (KPI’s) and measure them on a weekly basis.
- Review efficiency of business processes and consider alternatives such as outsourcing certain activities locally or overseas.
- Pull everyone together and explain the business strategy and get their buy-in.
- Seek advice when needed.
Don’t be afraid to ask your accountant for help when you’re struggling with a financial decision. They’re there to help you succeed!
When it comes to your company’s accounts and tax returns. GW & Co Ltd, offers Fresh Thinking, Friendly Advice for Your Business Success. If you’d like to talk about the issues raised in this article or any other accounting challenge facing your business, please do not hesitate to get in touch.
Tel: 01326 378288
Email: info@gw-accountants.co.uk
