As we moved into 2022 earlier this year, there was a collective sigh of relief as it felt like we had finally left the COVID-19 pandemic in the past. But in doing this, for many, it still feels a little bit ‘Groundhog Day’. It can be incredibly easy to keep your head down and charge forward looking for an ever-moving finish line, but if you take a breath and a step back, we would argue that now is an ideal time to take stock of a few things. This planning could prove invaluable in the long run so we’ve detailed four areas that we think business owners should evaluate.
We will bang on about this one until we are blue in the face – make sure you have enough cash in the bank. That probably means having more than you think you will need. There’s a good reason people say money makes the world go round, as, without it, you may not be able to act on opportunities that could be the making or breaking of your business.
As COVID restrictions have been lifted, are you continuing to face a surge in demand? Is your supply chain coping with this and can you afford to pay them for the goods and services you need? Have you been able to afford to bring back furloughed staff? Are you facing extra costs due to Brexit that you hadn’t anticipated?
One thing we’ve all learned as a result of the pandemic is that uncertainty is the only certainty and the last couple of years shook the world of business like it’s never been shaken before. On the positive side, many companies that were adamant working from home was impossible have implemented home working as a standard policy and furloughed employees found passions that weren’t their 9-5, many launching successful startups. But it also left some business owners questioning if the stress of running their business was worth the reward, prompting them to think about a change, whether that be a new career path or even retirement.
With change comes opportunity. We’re seeing a lot of businesses for sale and a lot of interested buyers, but don’t forget to look close to home too. A Management Buy Out (MBO) might be the perfect option, where you can pass on the business to someone you trust.
It’s important to highlight here the impending end to Entrepreneurs Relief, possibly to be announced in the next budget. At the moment, small business owners might pay as little as 10% tax on the proceeds from sale of a business but when this ends it is likely to be 20% or higher. If selling your business is on the cards, bringing this forward a year or two may be better in the long run.
If you choose to only do one of these four things, do this one. Keeping tabs on your cash flow is so important. Without knowing where you are, you can’t possibly know where you can go.
On a daily basis, look at what position you are in financially. Work closely with your financial controller, whether that be in-house or externally, and evaluate all money coming in and out. It’s important that you have a solid understanding of your current financial position. When you know exactly what position you are in, you can look at short term cash flow forecasting and see how you can adapt to any changes in revenue and costs that could affect your businesses as well as looking where you might be able to cut costs.
If you use Xero or Quickbooks and have an up-to-the-minute view of your current financial position, you can link your account up to an app, like Fluidly, and use their scenario planner to see how changes will affect your short-term cash position. If you’re not using a cloud accounting system that is compatible with these tools, there are number of other options to help you control cash. Either way, contact our team to talk through your choices when it comes to managing your short-term cash flow.
Your own wellbeing
It might be a cliché, but there’s a reason you’re supposed to put on your own oxygen mask before helping others. Burnout is real and it’s becoming increasingly common, especially amongst business owners. The challenges that have been thrown their way, especially in certain sectors, have been unpredictable and have undoubtedly had a negative impact on the wellbeing of a huge proportion of the working population.
When it comes to your business, lean on your accountant or business advisor. We are not just here for annual reviews or big one-off events when you need our expertise, we’re here for support. The worst thing you can do when it comes to tackling any challenges is bury your head in the sand. If you’ve got any concerns or worries about your business, give us a call.
Whatever the plan, have a plan. This plan can be agile, and it can change when external factors require this, but it is so important to anticipate what you can in order to put yourself in the strongest position for survival.
Contact our team on 01926 422292 if you would like help planning for the rest of this year and beyond.