As the high streets prepare for a shopper-invasion and the countdown to festivities begins, businesses that traditionally feel the financial impact of the peaks and troughs of seasonal trading are once again preparing their strategies to manage cashflow.
Research published earlier this year by Santander Corporate & Commercial suggests that 61% of UK small and medium-sized businesses are impacted by seasonality – with 37% suffering as a result.
But the truth of seasonality is that it doesn’t always fall at Christmas, nor is it industry specific. For businesses across the country, delayed receipt of revenue and seasonal fluctuations in demand can lead to serious cashflow problems that existing finance arrangements cannot accommodate. Even for the most hardy business management team, a significant slowdown in business or revenue can make for a tough time.
Management strategies that have been agreed in advance can help to soften the blow when a seasonal dip is on the horizon. Here are four ways to stay on top of cashflow when things get tight:
One of the biggest issues facing businesses today is that of late payment. According to the Forum of Private Business, more than one million UK SMEs currently face difficulties with late payment – about 20% of the UK’s business population. The total amount of late payments across the UK now stands at just below £37bn.
Of course, you want to keep the customer on side and encourage future business, so a slick invoicing and payment processing operation can keep relationships harmonious and reduce the chances of late payment. Make sure invoices are sent out promptly, chase due and overdue payments regularly. Consider introducing an incentive scheme where discounts are given for early payment. Interest charges and financial penalties can be applied for late payments.
Cashflow forecasting, as part of the wider financial planning process, is essential for all businesses – not least seasonal ones. Healthy and detailed insight into anticipated fixed and variable business costs, set against data gleaned from your sales forecast, can help predict the future cash needs of your business and allow you to put financial back-up plans in place.
Not only will this process keep you aware of your business’s cash position at all times, it will allow you to creatively map and move around payments and budget allocation during leaner months.
While you need to manage and improve cash inflow, there are creative ways of managing cash outflow, too.
When entering into a new supplier agreement or looking back on existing ones that can be improved, make your suppliers go the extra mile. Negotiate favourable payment terms, work to drive down the price, arrange purchases on a sale or return basis, or settle on a bulk discount agreement. If you can, work to spread out recurring expense payments throughout the year so that they fall outside of your slowdown period.
Many vendors and suppliers are flexible, since it is in their interests to retain your business and put an affordable and sustainable agreement in place that will also prevent them receiving late payment from you.
Seasonal trends are beyond our control. One-in-20 UK businesses closes their business during seasonal periods to reduce costs; 6% of UK businesses admit to relying on credit cards to manage seasonal fluctuations in supply and demand; 4% use business loans; while 17% either increase or decrease staff numbers.
For stability during seasonal slowdowns or growth management during speed-ups, short-term cashflow facilities can be an invaluable lifeline. These funds offer a precious injection to pay off creditors, pay staff and maintain an overall healthy operation.
In the £250-500k annual revenue category of businesses surveyed by Santander Corporate & Commercial earlier this year, 30% of those that suffered from seasonal fluctuation said invoice or supply chain finance was used to ride out seasonal downtime.
Invoice finance has now evolved through crowd-funding into invoice trading, a facility that creates a market between businesses and investors to give flexibility to businesses in need of short-term working capital finance, without the need for long-term contracts or a whole of ledger commitment.
Blog supplied by Beth Nicholas, writing on behalf of Platform Black, provider of complementary and alternative finance solutions.
The thought of starting a business now might seem to many a bad idea. These are the days of austerity, surely we need to keep our heads down, take stock of what we have and bide our time until this is over.
The reality couldn’t be further from the truth. The best time to start a business is during a downturn. In other words, if you’re thinking of starting a business, there couldn’t be a better time than now. So, let me explain...
Years ago starting a business was a more difficult process, because you often needed to take significant risks to get started. Nowadays it’s much easier and more and more people are starting their business from home with little or no financial risk. The internet has been a key driver in this, because there are so many opportunities online. Technology has also made it much easier to research ideas for businesses and what’s involved in running a business, so knowledge has improved and most people feel much more confident about taking those first steps.
A startup has very few expenses and overheads, so if you check out your competition, the chances are that you can undercut them. Their clients or customers will be looking for deals and cheaper alternatives that are just as good. So, it’s the perfect time to win them over. If you do a good job, as promised, there’s no doubt that you’ll retain those clients when the economy recovers.
If your startup depends on products from suppliers, this is the best time to negotiate a really good deal, because vendors struggle to sell products. When the economy is strong, vendors in the main set the rules for their price model and it’s very hard to broker a deal.
Whether they’re large corporates looking to scale back throughout the downturn or smaller companies that perhaps aren’t resilient enough to see it through, your competitors are in a vulnerable state. Startups are nimble, agile and flexible, and when you spot an opportunity you can pounce on it.
Previously, to get started in a business you either needed to self-fund or go to a bank for a traditional business loan. However, there are now so many different schemes and incentives, as well as crowdsourcing and independent investors that if you have a great idea – its possible to get funding quite easily and on reasonable terms. When the economy falters, angel investors in particular, look to move their money out of the stock market and may be willing to fund you if your prospects are promising.
If you’re able to secure funding and looking to grow your business quickly, you’ll probably be looking to increase your staff. In a downturn, when redundancies are rife, highly qualified, talented and effective people are much easier to come by.
A startup created during tough times is designed to be lean and ultra efficient. You’ll develop business habits that will help you get ahead of the game when the market recovers, with the scope to increase profit margins once consumers and clients are spending at full throttle again. If you can make it work in the bad times, it should fly once the economic good times return. Also for many people whose job is perhaps uncertain or if they have been made redundant, it becomes a chance to put control in to their own hands.
We have definitely seen a rise in the number of people starting up businesses from home, and although we still get people of all ages there seems to be a growing number of young people (18-25) starting up a company alone. So, if you’ve been considering starting your own business, this is the time to take the plunge.
Blog by Paul Bryant of Setup A Company
The Forum of Private Business (FPB) is warning business owners to be aware of seasonal dangers that could potentially leave them with “a nasty financial hangover long after the decorations have been taken down”.
“With their mix of drink, high spirits and merriment, Christmas parties are still the number one source of potential problems,” argues FPB business adviser, Joanne Eccles.
To make sure you and your staff remember Christmas 2013 for all the right reasons, the FPB advises business owners to:
However, putting on a Christmas party does have “an upside for employers”, notes the FPB. It says up to £150 per head of the cost of holding the party is an allowable tax deduction and VAT can also be recovered on staff entertaining expenditure.
“No-one wants to put a dampener on the festive spirit and Christmas parties are great for boosting workplace morale and allowing staff to let their hair down,” adds Eccles. “But business owners need to take some important precautions if they want to guard against potential litigation.
"Most of the regulations which govern the normal working day also extend to the Christmas party, wherever it might be held, so employers need to ensure they're not leaving themselves open to claims, complaints and time-consuming employee disputes.”
It’s not the CEOs of massive companies that are struggling, but the owners of the millions of small businesses and shops across the country. In his recent Autumn Statement, George Osborne acknowledged some of the issues that affect these small businesses, and laid down ways in which he hopes to help them.
George Osborne said in last week’s Autumn Statement, “There is one group of businesses that have found the recession especially hard – as it has coincided with a rising challenge from the internet that is only getting stronger. These are our local retailers – the shops, the pubs and the cafes that make up our high streets across Britain. With Small Business Saturday this weekend, I want the Government to do all it can to help them. We’re already changing the planning rules to help town centres compete. To get the vacant shops that blight too many town centres to open again, I am introducing a new reoccupation relief that will halve the rates for new occupants.”
His words are reassuring for many small business owners, but the question that may still be lingering in their minds is, “How does this all affect me?”
It’s clear that small businesses play a big role in the economy, and if the Autumn Statement is anything to go by, the future looks bright for SMEs. Time will tell whether the Chancellor’s promises come true, but for now, small business owners can rest assured that relief will be more available than ever. In the words of Osborne himself, “Britain’s moving; let’s keep going.”
This article was provided by 1st Contact Accounting, which gives forward-thinking individuals the tools to steer their financial affairs forward.
For many reasons small and large businesses choose to outsource particular tasks or services to third parties and agencies. As outsourcing continues to evolve, so do the reasons for SMEs and bigger organisations to consider adopting those methods for the good of their business.
The primary reason for outsourcing and outsourcing immediately is to cut costs, because this is the main driver for many businesses that choose to outsource work. But let’s look beyond the pound signs and see some of the other popular reasons for outsourcing services in 2012 and beyond.
In demanding industries there are many instances where highly pressurised employees simply don’t have enough time to focus on core business functions that can drive long term growth.
Businesses need as many people as possible to be able to focus on the profit-driving areas of their organisation. By outsourcing certain tasks or services to third parties, companies can save valuable internal resource to devote towards moving the business forward.
Some businesses choose to outsource particular services or divisions of their business overseas to take advantage of greatly reduced corporate tax rates. Countries such as Hong Kong, Taiwan, Singapore and closer to home, Ireland, all boast very low corporate tax fees that can significantly improve a company’s bottom line.
There may be an area of your business that would require significant in-house and external training to get employees up to speed. Subsequently, it may be more cost-efficient to simply outsource the entire service to a third party or agency. It is quite possible they will add greater value than you even anticipate due to the skills and expertise they possess. Why spend time and money learning new services and skills if you can employ a professional to do it for half the cost?
In some cases, businesses choose to outsource services or divisions of their organisation to make sure they appear constantly accessible and available. To create the impression of operating 24-hours without closing down it is possible to outsource to an overseas partner that can do important work overnight, while catching up on much-needed sleep!
Although reaching agreement with outsourcing contractors can be unsettling and protracted, outsourcing work carries significantly less contractual risk than employing a full-time member of staff. Contractual agreements can be created to offer protection for both parties, while removing any difficult human interaction that can occur when in-house employees are dismissed. Outsourcing firms can be held just as accountable for poor performance and poor quality of work as a full-time employee.
While outsourcing requirements will naturally differ from business to business, there is no getting away from the fact that outsourcing is becoming a key component to the day-to-day strategies of successful businesses.
Blog written by David Campbell of Pall Mall Estates, “one of the UK’s leading providers of affordable commercial space to rent”.
I’ve always believed that a healthy mind is a key success factor in running and growing a business and that there is huge overlap between sports and business. Entrepreneurs are the top athletes of the business world. With the same passion, the same ability to postpone gratification, with the same ability to focus and suffer when needed.
When you listen to sports coaches, they talk exactly the same language as managers, but in a different context and with more focus on results and more of the fluff removed in sports. I once heard Ray Colgan of Ulster Bank speak about the Dublin Gaelic football team. Key metrics? Tackle count and training hours. Simple as that.
Recently I was at an event where sports initiatives and concept were pitching. Two companies talked about measurement of sleeping patterns, food intake and training effort for athletes. Imagine doing the same for entrepreneurs. Ensuring a healthy mind in a healthy body and a key contributor to business success.
Our clients are also always looking for ways to engage with their staff and ensure that they are happy. Maybe it should become more holistic and include all aspects of life, including sleeping and that goes beyond “Employee first, customer second” or “The great workplace” and would suggest a more holistic approach.
Which brings me to the book, Move, Eat, Sleep by Tom Rath. Tom has a genetic disorder, which means he is very susceptible to cancer, so he needs to watch what he is doing and eating all the time. In this book he shares his experiences, the research and his observations. It’s absolutely fascinating.
The title says it all. You need to sleep well and it is the most important lesson. Not sleeping well kills. You need to eat properly. Sugar kills. Carbohydrates kill. Movement is key. Not just exercise. You need very regular movement during the day. Sitting kills. Watching TV kills.
Here are some of the stats included in the book:
The book does make a few reference to the marketers and how we are being manipulated and fooled by the words they use, the ingredients they put into food to make us all addicts.
The book also contains some tips:
So if you move well, sleep well, don’t watch TV and eat broccoli and berries, you live to be at least 90. And you’ll be more successful and happy.