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small business, inflation

5 ways to prepare your cashflow for rising rates in 2023

Kirsty McGregor Apr 12, 2023

Prior to Covid-19, the local high streets in smaller towns were struggling but cities seemed to be faring better.  However, during lockdown, the larger towns and cities became almost deserted and many shops and retailers saw their footfall decrease rapidly.

Lockdowns may have eased but there has been a notable permanent change in working practices which has had a lasting impact on the high streets surrounding the major business centres.  

According to this recent Guardian article, some smaller companies have abandoned permanent offices altogether, as many executives accept hybrid working is here to stay.

This challenge, along with rising interest rates, higher energy costs and wages, plus operational challenges with some payment providers provides both a cautionary tale and an opportunity for businesses running bricks-and-mortar shops.

Here are the main things you need to be aware of and some things you can do to protect yourself from risks.
 

Business Planning 101

As both sales and cost lines see continued fluctuations from the norm pre-Covid, businesses which could predict revenue and expenses without worrying about their day to day cashflow, now find themselves back at the drawing board. 

When outcomes are less known, planning becomes more essential. Business plans and cashflow forecasts are often painful to create, especially when assumptions are fluid, but they are a necessary starting point to provide some more knowledge, and hopefully, more comfort about the future outlook.
 

Key areas to consider are:

  • Sales demand volumes - how accurately can you predict these?
  • Pricing - how much can you increase prices?
  • Suppliers costs - are these current and will they increase further?
  • Wages - are these in line with market conditions?
  • Overhead costs - can these be fixed to provide more certainty?
  • Financial costs - are interest rates having an impact on your costs?
  • Cashflow - do you have sufficient headroom?

 

Rates, bills and wages increasing from April 2023

April is unfortunately a month where many costs increase for small businesses and 2023 finds minimum wages increasing again, effective hikes in various taxes, energy support decreasing and potentially changes to business rates too.
National minimum and national living wage rates increase from 1st April which will add more cost pressure to small businesses. 

Taxes are increasing for companies and as many thresholds or allowances are frozen, other taxes feel like they are increasing as Enterprise Nation told Bdaily recently. 

Energy bills support changes from 1st April and FSB has reported that 370,000 small firms who signed fixed-term contracts last year may have to consider closing, downsizing, or restructuring if they remain locked into a fixed rate tariff contract when Government support ends.

Rateable values of non-domestic properties are revalued every five years by the Valuations Office Agency (VOA) and 2023 is the start of the new cycle.  As a consequence, property owners may find their business rates change.  Some will reduce but this is expected to favour larger retailers and according to Savills, “convenience, retail services and independent-based locations will have a raw deal”.  Small retail, leisure and hospitality occupiers should still benefit from a 75% relief in 2023 as part of post-Covid business support measures, but this is subject to a cap of £110,000 per business (not per property).

 

Interest rates

Speculation is rife about whether we have hit the peak of the Bank of England base rate increases. Whether more rate rises are expected or not, it is unlikely that rates will return to the previous 0.5% levels for many years to come. 

As bank overdraft facilities become due for renewal and fixed rates on mortgages end, there will be a notable increase in cost of new facilities for small businesses. 

However, conversely, longer term facilities are currently seeing a softening in interest rates as lenders reconsider their predictions for the future.  

So this could be an ideal time to refinance business debt.  This exercise will require more support than business owners may have used previously, as the market is so changeable.  

However, using a platform such as Capitalise makes it so much easier as we offer access to a wide number of lenders with just one application.

Then with support from our knowledgeable funding specialists you can get advice on the most appropriate products in the market and find the best rates available.  

Checking your business finance options in good time is always encouraged, before your business loan, overdraft or mortgage is due for renewal.  As it’s so easy it is worth reviewing the market just for curiosity and market research purposes at any time. 
 

Point of sale merchant facilities and payment providers

There have been recent reports of operational issues with Worldpay’s systems which are affecting small businesses.  After requests to send identification documents to the company, which have been sent, many have found their monthly income from Worldpay stops for many months whilst this documentation is reviewed.  

BBC Watchdog has been investigating and family owned companies, retailers, beauty salons and other small businesses have taken to twitter to add their voice to the complaints. 

This has led to other retailers to consider how reliant they are on their existing providers and facilities and to put alternative cashflow solutions in place. Merchant cash advance could be one such product which would provide a back-up safety net for small businesses who trade using card terminals. 

 

Prepare ahead to bring peace of mind

As entrepreneurs face up to the continuing challenges in running their businesses, acting ahead to stave off any potential crisis will bring peace of mind.

Consider the impact on your business’ finances this year and put in place sufficient cashflow facilities to ensure you can continue to operate without worrying about how you will pay the bills. 

Capitalise and your accountant can support you to review your situation and decide which funding products will be most appropriate for your needs.

You can check your options for free from within your Capitalise for Business account, using the funding calculator.  Or you can start a chat with our team of funding specialists if you have any questions. 
 

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