I do hope you’re feeling chipper about the new year and that things are off to a promising start.
Last year there was a widespread feeling of confidence and growth amongst the companies we worked with and talked with. And I’m still feeling really confident about this year too.
BUT
Something’s happening in the economy, something we can’t ignore. There’ve been whispers of a difficult year ahead, and now we’ve got figures showing that the numbers of companies in significant financial difficulty rose sharply by 17% at the end of 2015.
The Red Flag Alert published this week by Begbies Traynor reported 270,000 companies who have seen their sales, profits or working capital worsen to the point that their business is now in distress.
We’re seeing UK manufacturing shrink, China slowing down and a collapsing oil price – which all adds up to a “dangerous cocktail of global risks” according the Chancellor last week, and we’re being told to expect greater headwinds and challenges this year.
And don’t forget our operational costs are increasing too; potential interest rates rises, living wage increases, auto enrolment, and the new dividend tax from April (unless we can stop it!)
So, great news for the insolvency guys, but not so good for us.
So, what can you do about it?
Well, you have to be in control of your finances and make sure you’ve got the right financial information, processes and controls that will help you manage any uncertainty heading our way.
Controlling your finances and your cashflow in particular, is the key to a successful business in any economic climate, but never more important than in uncertain times like these. And the time to make sure the roof isn’t leaking is now, before things start getting tricky.
Sales, profits and cashflow rarely get worse overnight – there are clues and signs if you know where to look. So you need to know precisely where your business is right now, and where it’s headed – visibility is everything. Make sure you’ve got the basics in place so you’ll be confident about your cashflow and know you’ll see any problems coming in plenty of time to fix them.
The basics you need in place:
- A cashflow forecast – ideally a 13 week rolling forecast
- Accurate monthly management accounts that tell you where you are against your plan
- A forecast for your current year so you have a route map of where your business is heading that you can measure against.
- A dashboard that tells you at least weekly how things are going
- Make sure you have all your taxes put away in a separate bank account and start building a cash buffer – ideally 2-3 months overheads.
If you’re not sure where to start, head over here to have a look at how we help businesses get their finances in good shape and be prepared for the unexpected.
And if you want a confidential sounding board on your financial shape, please lift the phone and call me on 0115 984 6344 or email me Serena@fwordtraining.com ….. that’s what we’re here for.
One last thing, I think we need to make sure the economy doesn’t get talked down like it did in 2008 – let’s keep the confidence high, and our businesses safe.