The current economic environment for businesses is unusual. The ONS statistics don’t reflect a recession yet, but there is little or no growth either.
According to the Bank of England, this flatlining or very shallow recession is likely to continue for some months and possibly into 2024.
This blog discusses five steps you can help your small business clients to ensure they are resilient enough to manage these trading conditions over a long period of time, enabling business leaders to maintain their confidence. To not only survive, but thrive.
1. Use Your Numbers
Business leaders put themselves in a powerful position when they not only know their numbers, but then use them to make commercial decisions.
As inflation is having a continuing effect on materials prices, overhead costs and even wages, having up to date financial accounts is essential to understand what margins they are operating on and the full extent of thier true costs.
Thier credit score is the external view of your risk, so understanding how you are perceived by others will assist them when negotiating with suppliers, lenders and potential trading partners.
2. Staying Agile
Businesses which have a management system that provide a structured review and decision-making process, tend to make more effective decisions.
Using accurate information, discussions can take place which consider various alternatives, but then lead to a firm conclusion.
This allows the business to remain agile and respond to current risks and opportunities appropriately.
3. Have a Growth Plan
Previous recessions have shown that those businesses which continue to plan for growth are ultimately more successful than those which hunker down.
There are always some winners during recessions and businesses which emerge stronger after a downturn.
Helping your clients prepare business plans and financial forecasts will provide the confidence to continue to invest in marketing, necessary recruits and equipment.
Reviewing the results to measure effectiveness is also sensible when markets are potentially being continually affected.
4. Take Advice
Having a strong group of advisers around the management team allows businesses to brainstorm ideas, stay accountable and maintain trading momentum.
Business owners have so many tasks and it is rare to find a single individual with skills in such a wide range of commercial areas which are necessary to run a company.
Delegating to a management team with specific responsibilities and using experts with specialist knowledge, will benefit the company immensely.
Professionals in services such as accounting and legal will also have the advantage of seeing many businesses in different sectors. Sharing this information brings the benefits of a wider pool of knowledge to a single company.
5. Focus on Cashflow and Access to Credit
Access to cash and working capital is critical for businesses who may experience an unexpected cost or alternatively wish to grow.
Working capital can be maximised when companies:
- use supplier credit terms as a source of free cashflow
- minimise any risks when granting customers terms; and
- ensure any interest rates for lending facilities are as low as they can be
This can all be achieved by companies who have strong business credit scores but only 29% of business leaders know their own credit score.
Companies which monitor credit scores are also 6 times more likely to be in the highest rating, an A credit banding.
Using this best practice approach will lead to a stronger business and a more confident leadership team.
To help your clients understand thier own credit score and how to improve it, give your clients access to Capitalise for Business.
You can also then choose to monitor up to 10 or up to 100 other companies, such as your customers and suppliers, to track the stability of your trading partners