As we settle into the second quarter of 2023 businesses are feeling the pressure, and some owner managers may have to face a cashflow crisis. Due to the significant increase in the cost of living, in addition to the higher interest rates and inflation many consumers have had to tighten their purse strings, which is resulting in a negative knock-on effect on businesses.

The old proverb ‘cash is king’ is more important today than it ever has been before, and if business owners want to be able to navigate the current downturn successfully, they need to manage their cash carefully. When trading conditions become difficult, this can often be a sign that it is time to review and reanalyse where they are receiving capital from and where they are spending it.

So, there are several things that business owners can do in Q1 2023 to help weather the storm and alleviate cashflow pressures:  

Cashflow confidence

Ensuring that they have effective cashflow analysis and forecasting is one of the main ways that business owners can remain confident about the future. Having a clear prediction of revenues, costs and outgoing for the next six months will aid decision makers of the business to react promptly to market changes as they occur.

Cut back where you can

In addition to consumers reducing their discretionary spend, business owners should also be looking for where it is appropriate for them to do this too. As circumstances change, businesses should review their costs to ensure that they are in line with current needs and changes in market conditions. What has previously been a priority may no longer be delivering value and may now represent a cost-cutting opportunity. Think Netflix subscription versus Now TV or Prime. Are all of them necessary or could cut down one or two?

Collect your income

Whilst constantly chasing people for payments could seem insensitive, business owners need to understand that a customer who has not paid them has little commercial value. Being efficient at debt collection will help to ensure that invoices are paid promptly, and this can be very effective in protecting the bottom line. You reap the benefits of paying the cost of employing someone to do this for you.

Look forwards, not back

Instead of focusing onwhat has happened in the past, business owners should aim their focus on looking forward as far as is possible to improve their resilience. By planning for the future and establishing their decisions on robust forecasting models, it will become evident if the business can withstand times of hardship, or whether having additional funding might need to be considered. The sooner you identify issues and seek help the better and you can only do this by looking towards what future may bring.

Is outsourcing an option?

Outsourcing specific tasks can relieve some of the pressure on internal resources, at the same time allowing business owners to keep their focus on day-to-day decisions, strategy for the future and ensuring that points of pressure are highlighted early on. This could incur an additional cost, but it could be one that is worth considering.

For further information, or to discuss your specific circumstances, please contact Bethan Evans, or contact us via the below contact form.

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