Having prepared for Brexit and weathered Covid, businesses now face the ongoing financial crisis, but instead of just bracing for the worst, people should know it is possible to both survive and to thrive.
The Thrings Business Growth Team was set up to support the SME community in the South West, recognising that that they are the engine of the region’s economy.
This week, Ramona Derbyshire, Head of Business Growth, spoke at The Breakfast Exchange, co-organised by Thrings, The Business Exchange and accountants Richardson Swift, about steps businesses should take now to help navigate the challenges and opportunities ahead. Here is her advice.
1. Stay close to your cash flow
We know from previous financial crises that those who plan well weather the storm better.
Talk to banks and funders so there are options if there is a future need for support. Examine forecasts and debt regularly and review your credit control processes. Small changes like sending polite reminders before due dates can help keep funds flowing.
Move quickly over late, large or critical debts – don’t put your head in the sand. Legal action is an option but having an eye on your customers’ financial health and keeping the lines of communication open can help get the cash to you more quickly. Having robust contract terms that deal with late payment can also make it less damaging.
2. Protect your supply chain
We regularly see cases where a client has been unable to meet obligations to a customer because of a supplier fault. This can lead to frustrated customers and reputational damage.
Take a “zoomed out” view of your supply chain to spot potential pinch points, and make sure you avoid reliance on certain suppliers by having alternative options.
3. Review your contracts
For supplier contracts, ensure you have clear pricing, and that any price increase provisions are reflected in your customer contracts wherever possible, or can only be enforced with your agreement.
For customer contracts, pricing terms are important to allow you to increase if necessary. Ensure that you have the option to terminate a contract if your customer’s financial health looks like it might be struggling, before they enter into a formal insolvency event.
4. Have up to date shareholders’ and directors’ agreements
Incorporated businesses and partnerships should have strong shareholder or partnership agreements that set out how you intend to manage your business and which will deal with challenges. They need
to be flexible enough to move when the economy changes and can help overcome issues that can be distracting and lead to emotional stress for you and uncertainty for your business and its people.
5. Safeguard growth and identify opportunities
In a difficult climate there may be good acquisition opportunities available, and similarly there may be the chance to step into a competitor’s place if they are struggling. Being proactive, rather than waiting it out, can be the difference between surviving and thriving.
Look for opportunities, but be aware that some business will fail. Take professional advice early if there are any concerns.
The Thrings Business Growth helps businesses thrive by providing practical business advice from commercial specialists. For more advice please get in contact today.
