It’s a difficult time to be a business owner. Just when you think one economic crisis has ebbed, another comes along to compound matters further.
In recent years, UK directors have had to navigate global pandemics, Russian invasions, and record inflation rates.
With recent news suggesting that attacks on shipping vessels in the Red Sea are likely to push costs for UK companies up further still, owners need to solidify their financial position to withstand any further surprises.
Rick Smith, managing director of business consultancy, Forbes Burton, commented “if the last few years have taught business owners anything, its to expect the unexpected. The problem directors have right now though is that current economic conditions have already pushed their finances so close to the bone that another economic event could see them fold”.
He laid out four financial practices that businesses should adopt in order to become resilient enough to withstand whatever the coming years bring.
It’s a chore but filing your tax returns early can potentially make your life a lot easier later on. By getting this job out of the way, you’ll get an idea of what you’ll need to pay in January. Having this information early on allows you to plan for the payment of it as soon as possible, and start putting a little aside.
Leaving things until the last minute creates the potential for a nasty surprise when you see the tax bill. Worse still, it gives you little time to save up for it.
It needn’t be a global economic crisis that troubles your business: something as simple as replacing a work vehicle can also stretch your funds.
Businesses should ideally look to keep a third of their earnings available as reserves each month. If that’s impossible for your company at the moment, just try to put as much as you can to one side.
Cars break down, work equipment fails, and computer suites need replacing every so often. Your business needs to be in the position where it can absorb such costs without teetering on the brink.
When things are tight, one of the first things to be sacrificed is often the owner’s own wage. This is a mistake though.
Your business finances should be secure enough to afford your own wage. If it isn’t, they need serious attention as soon as possible.
By skipping your own wage, you may be able to create a brighter picture of your company finances in your mind, but in reality, this means that your business is not performing as it should.
Poor handling of invoices is one of the easiest ways for businesses to find themselves in financial trouble.
If the invoices you’re owed aren’t paid as quickly as you have to pay your suppliers, then you’ll quickly find yourself struggling.
Make sure that you have stringent payment policies in place and chase up any outstanding invoices that are overdue.
Hopefully, your business already has each of these tips in place. Together, they form the pillars of a well-run business, and should be common practice.
Anything less, with today’s economic headwinds to contend with, can see companies risk insolvency.
If, however, you find it financially difficult to implement any of these changes, your business may already be at risk.
Forbes Burton have helped countless companies to navigate tricky economic situations by offering practical solutions to complex issues.
Worried business owners can contact them for a free consultation with one of their specialist business advisers for more help.
