With the whirlwind of the last 18 months still at the front of everybody’s mind, the Government’s ever changing COVID-19 support packages and restrictions have been a direct influencer for business owners decisions across the industry sectors. Now, with the majority of restrictions relaxed across the UK, business leaders can now take the steps they need to regain control of their businesses – but where is the best place to start?
The pandemic threw many challenges our way, with businesses taking the brunt of the hardship, some having suffered greater misfortune than others. For many, they were forced to close their doors altogether for long lengths of time, whereas others benefitted from an increased demand for their goods and services. One of the saving graces for businesses was the Government’s business support measures, taking the form of an implemented furlough scheme, loans and grants; helping protect jobs and keep them going.
With the furlough scheme due to end on 30th September this year and capital repayments already kicking in for many with Coronavirus Business Interruption Loans (CBILs) or Bounce Back Loans (BBLs), many businesses are now seeing their cash outflow increase. At the same time, trading conditions have become more challenging for some businesses, particularly in sectors such as construction and manufacturing, which are currently being affected by skills shortages and a lack of materials availability. For businesses that source raw materials and goods globally, significant supply chain disruption remains a major cause of frustration, which is continuing to erode margins, impact business performance and affect cash flow. Those businesses that adapted successfully and adopted a positive, entrepreneurial mindset during the pandemic are more likely to find themselves in an improved market position, although revenues are unlikely to have recovered to what they once were. Achieving sustainable growth however, will remain challenging for many businesses; requiring a clear business strategy that balances long-term goals with agile, short-term decision making.
Top tips to help business owners take back control of their commercial destinies:
Strong leadership has never been more important to the performance of SMEs than it is currently. The key to strengthening and forging strong relationships with customers, employees and suppliers is for Business owners to approach their role in a positive and energetic way. As markets rebound and demand levels climb, they will be well placed to leverage these relationships and steer clear of any short-term risk factors that could undermine their business performance in the short and long term. However, do not assume that customers and the supply chain are robust. To help mitigate business interruption and cash-flow challenges, maintaining close communication and undertaking credit checks is key.
Planning for future growth
With activity levels increasing across the industries, many business owners are planning for future growth. Costs are now slowly rising, but as support initiatives are withdrawn, predictions for some cost increases are becoming more challenging. These include costs associated with material shortages or skills, so there is still a need for caution. Plans must be robust and take a realistic view of demand-led resource requirements.
The importance of numbers
Business owners need accurate and timely financial information in order to plan effectively. This information needs to be based on forward-looking critical assumptions of where the business is currently and where it is aiming to be in the future. As costs increase, business owners need to know if there will be sufficient cash to fund their strategic growth plan, or whether they require additional assistance. If they fail to develop a cashflow model based on accurate three-way forecasting, there is a likelihood that they could fall into the overtrading trap as growth returns, leading to financial difficulties.
Remaining cash-flow positive
As the business grows, it is important to stay cashflow positive as this is the time that it is likely to bring the biggest challenges for many SMEs. It is important to bear in mind that growth plans must be funded and, at the same time, financial commitments must be met on time and can’t be allowed to slip. Many businesses have already started making capital repayments on their CBILs or BBLs loans. In addition to this, some have struck an agreement with HMRC to repay a deferred tax liability. These payments must stay on track and any tax due on current earnings must also be paid in full, or the agreements they have secured could be withdrawn.
Look after your workforce
Effective leadership is an important element to help businesses retain skilled staff and recruit new talent; giving them a competitive advantage. By seeking to understand the effect the pandemic has had on workers both individually and collectively, business owners can make changes and implement steps to make sure all employees feel comfortable in the workplace. It may be necessary to take advice about the introduction of a wider range of rewards, as well as flexing policies to give workers what they want. In particular hybrid working, where appropriate. A key challenge coming up could be planning for a return to the workplace and business owners will need to design their workplace policies around the sensitivities of the existing employees and new recruits.
Take a reality check
There is no doubt that the pandemic has created unusual and unpredictable trading conditions for many industry sectors, it is therefore important to sense check the financial models used to forecast demand and business performance. For example, businesses may think that they will be able to recruit additional resource as they scale their operations, but may not have considered how the mindset and expectations of workers have changed during the pandemic. Equally, will they be able to source the materials they need to increase production, at a time when supply shortages are becoming more prevalent.
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