When times are tough, things can seem out of your control. Wages, materials prices and transport costs are going up, no doubt about it. Profits in most sectors will take a hit this year and next, which we know the Bank of England has been predicting for a while.
We have previously talked about 5 ways a business can reduce costs and whilst some sectors may be able to use these ideas, they may not be possible for all companies, leaving some business owners scratching their head about what they can do next.
Whilst rising costs may seem an inevitability, there is something even more important than costs, which you should be monitoring to gain back some control over your business - your access to a headroom in your cashflow.
Companies don’t collapse because they’re loss-making. They hit the wall because they run out of cash. And this can happen to even profitable businesses.
Having funds to make payments to suppliers when they’re due, to HMRC, external lenders and crucially, to employees for their wages, will ensure you can continue trading in the immediate term.
Savvy businesses know they should work on their longer-term profitability but obsessively watch their cashflow headroom, more than any other number in the short term.
This can be protected if you focus on these 3 things:
1. Track your credit score
It’s essential you know how you’re perceived by the outside world. Stronger credit scores maximise your supplier credit terms and make you appear more stable to potential customers and lenders.
However, credit scores are usually calculated automatically by credit reference agencies and sometimes they appear unfair because they don’t have enough information to make a true judgement. Our ‘no-win, no fee’ Credit Review service checks that your score is as high as it can be and this helped a recent customer of ours, a pizza delivery company who was suffering just because their whole sector had been downgraded. Once their score was recalculated, this increased their limit and access to better trade terms to take the pressure off cashflow.
And don’t forget to keep a track of your own customers’ credit scores too, which you can do easily with Capitalise for Business. Use this to make smart decisions about the terms on which you trade.
2. Leverage your assets
Larger companies sweat their assets to ensure they’re working hard. Using company assets such as equipment or trade debtors as security will open up access to lending facilities. If you can bring cash into the company at a cost which makes good business sense, then you can use these funds to grow and increase your profits.
We recently worked with a grocers and butchers shop to help them expand into new premises by purchasing the building instead of renting, even at a time of a crazy property market.
3. Plan ahead
However you do it, whether with formal financial projections prepared by your accountant, or by using our new Cash and Capital Reporting tool, you’ll sleep better if you’re aware of where you stand, so you can see what’s coming around the corner in good time.
Giving yourself more time opens up your options. In our 2022 Get Fit for Business report, 61% of business leaders said they would need funding to achieve their goals in 2022. Yet we know that most small businesses only allow themselves 7 days to find that funding and 1 hour to research it!
Being sure that your credit score is strong will certainly help you access better rates and working with the funding experts at Capitalise will help you connect with 100+ lenders and help you understand all the choices you have in this fast-moving market.
Get the control you need for healthy business growth. Track your credit score, access funding and monitor your business performance, all in one place with Capitalise for business.