As is the case with many business situations, the current economic climate is difficult to predict. However, what is clear is that the uncertainty is impacting consumer confidence and business growth.

With the general election coming up, there are now even more unknowns for businesses. There could be an immediate adverse impact, particularly for SMEs who don’t have adequate contingency measures.  Sectors expected to be most vulnerable include financial services, manufacturing, food and drink, hospitality and leisure and agricultural and fishing – in short, some of the most important industries in the country.

Key actions for SMEs

Whilst it is impossible to prepare for all eventualities, how businesses ride out the current economic uncertainty will determine their success in the coming months and years. We have come up with some key tips to share for navigating the landscape ahead.

Good quality management information

Financial records are the backbone for all businesses. Good financial records are essential to understand whether the current business model is working and also to make decisions on future growth strategy. This is particularly relevant right now when you need to be able to understand which areas of business will be most impacted.

Cash is king

Positive cash flow in a business is necessary to fund trading and growth. Prepare weekly cash flow forecasts to show what payments need to be made, and where the money is coming from. This will also assist in identifying any future funding requirements.

Manage customer payments

It’s good financial discipline to monitor customer payments, to ensure they are in line with invoicing terms and take a pro-active approach in chasing customers who pay late. Late payments continue to be a critically important issue for SMEs as smaller businesses are typically more dependent on cash flow than their larger counterparts, with smaller cash reserves and fewer options to fall back on.

Open dialogue with creditors

If struggling to pay liabilities of the business, consider engaging with creditors to agree a payment plan. Struggling businesses that we meet tend to have HMRC arrears. Opening dialogue with HMRC and seeking to agree a Time To Pay (TTP) Arrangement can reduce serious pressure on business owners. We have specialists in this field who can provide assistance.

Seek external funding

Having a funding facility in place that’s available when finances get tight or growth opportunities arise is a good contingency plan.  A fall in the pound post Brexit could result in a rise in inflation and the Bank of England increasing interest rates, making additional borrowing more expensive. So now is the time to consider whether funding is required. We specialise in finding the right solutions through our team here at Reach Commercial Finance.

Get advice when necessary

No matter what issues are affecting business profitability and long-term sustainability, do not ignore the warning signs. Early intervention provides more options. We work across the UK with SMEs experiencing financial difficulties to provide practical, straightforward advice.   The key message to act early, know what the trigger would be for seeking advice and don’t be afraid to seek advice from an expert.

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