Many businesses across the UK have been financially affected by the cost-of-living crisis and inflation and have also suffered from the fallout of Covid-19 loan schemes and companies’ failure to make repayments.
While it is not all doom and gloom, it is only natural for businesses to worry about the future. Here are some ways to combat any economic difficulty and ensure the financial well-being of your business remains healthy.
Cash flow
Maintaining a cash flow forecast will help you understand when money comes in and goes out of your business, allowing you to plan for any potential shortfalls.
Expenses should also be reviewed regularly, identifying areas where costs can be cut without reducing the quality of your goods or services.
If you have debtors, then they should be managed effectively by implementing procedures to minimise late payments and bad debts.
Other financing options such as short-term loans could also be considered when bridging potential gaps in your cash flow.
Delay in obligatory payments
Statutory payments such as VAT or Corporation Tax need to be regularly monitored to avoid late payments. When receiving money, some should always be set aside to pay these taxes.
Account management is also crucial. Accounts that are regularly kept up to date will make things much easier when it comes to tracking payment deadlines.
Persistent losses
While occasional periods of loss are expected in business, you don’t want this to extend over a prolonged period.
To avoid this, regularly monitor your financial health with financial reporting. These reports can help identify negative trends early and address them before they become a bigger problem.
A robust business plan will also negate persistent loss. This plan should include a strategy for dealing with losses and a contingency plan for any unexpected events that could arise.
Pressure from creditors
You may not perceive your business as being in any financial danger, but if money owed to external parties or other businesses begins to accumulate, creditors may become increasingly assertive in their efforts to recover their funds.
As such, creditors should be managed effectively by keeping in constant communication with them. Creditors are more likely to be understanding of your situation if you keep an open line with them.
Prioritising payments to creditors who are crucial to your business will also ease this pressure.
In terms of debt, consolidating multiple debts into a single payment may reduce your monthly repayments.
Businesses often face financial challenges, but these are not insurmountable. By managing your business efficiently and remaining organised, you can prevent many negative scenarios from escalating.
If you are worried about the financial state of your business, please contact us today for expert advice.
