Businesses are being urged to follow a checklist of measures to ensure they are well-equipped to deal with a potential downturn in the coming months.
The UK economy contracted by 0.2 per cent between April and June for the first time since 2012, and another period of negative growth would see the UK slipping into a technical recession for the second time in a decade.
With this in mind, CVR Global’s Bai Cham – who has more than 15 years of insolvency experience – has set out some pointers to remind businesses what they should be doing now to weather the economic storm during what is one of the most uncertain periods in British history.
Cham’s advice includes:
Regular forecasting – You should be forecasting at least 12 months ahead and reviewing your actual results against budget on a periodic basis. This way, issues can be identified quickly, and appropriate action taken. Whilst there are always fluctuations in results, if you begin to see negative trends over, say, a three-month period, then it is the time to take action and speak to a professional advisor, such as an insolvency practitioner.
Adhere to strict credit limits – Offering credit to your customers is just part of doing business, but it carries with it a cash flow risk if customers start exceeding their credit limits. Therefore, ensure that you set, and maintain credit limits with all customers and make sure that they adhere to your credit terms. Consider declining supply to customers who exceed their credit limits.
Chase cash – It sounds obvious, but most businesses that fail are those who do not chase for payment of debts owed to them, thus leading to a significant proportion of their working capital being tied up in debtors. Having tight credit control and continually chasing for payment from customers reaps rewards and will ultimately benefit your cash flow and bottom line.
Talk to your suppliers – It is also important to understand the financial health of your suppliers, as ultimately, this directly impacts on your ability to trade. If they are struggling, then consider sourcing an alternative. If you can only source from one supplier, consider whether to stockpile.
Don’t leave it too late to seek advice – The most common mistake made is that business owners leave it too late to seek help. As insolvency practitioners we aren’t just here to deal with the consequences of financial disaster, we are also here to prevent it, so if you’re in doubt about your business’ performance, then please get in touch.