There are a number of business owners that we have spoken to recently that are worried about the futures of their businesses in these uncertain times. In our latest blog, Helen explores where your business can future proof, or whether it may be the right time for a change of scene…

Take a Step Back

The most important thing that you can do when you start to feel worried or uncertain about the future of your business is to take a step back and take stock. It is crucial that you don’t make any rash decisions as decisions made during times of stress or desperation are often poor ones.

We have also recommended to our clients to turn the news off! There is a lot of doom and gloom in the news and often it isn’t accurate or relevant to you and your business. We don’t mean to put your head in the sand, but perhaps allow yourself a certain amount of time per day for the news, then steer clear of the drama in the media. This will allow you to take away the relevant facts, make evidence based decisions without being negatively influenced by the media who may have a skewed view of the facts.

Focus on Yourself

Running your own business can be a challenge, but it is also one that is worth working hard and focussing on as it can be incredibly rewarding. During times of uncertainty it is natural that we look at how others are coping, measuring our lives against the highlight reel that you are able to see of their lives and businesses.

Now is the time to focus on yourself, removing distractions and working to create your own strategy that works for you and the business.

Evaluate Your Position

If you are concerned about your business finances and haven’t got a clear idea of where your finances stand, now is the time to take stock and review your expenses and spending – both personally and professionally. You will need to look at your bank accounts and make notes of the funds you have available to you right now and also work out your average monthly income.

  • Make a list of all of your outgoings, including mortgage, rent, rates, utilities, taxes and even your weekly food shop.
  • Once you know how much you and the business need to survive and thrive, then you can assess whether you need to bring in more money or cut your costs.
  • If your expenses outstrip your earnings, we can help you to create a plan to increase your income.

How much is owed to your business? Often, we keep track of our invoices but neglect income streams such as HMRC repayments due, potential business grants or diversifying your services to bring in more money.

We use and recommend accounting software that gives you real time insights into your business finances. We love using Xero accounting software, we are Xero Silver Partners, which will help you to report on all your income and outgoings. Using and understanding your accounting software can help you get a clear picture of where you’re at from which we can create a strategy for you to see where you can improve upon your business finances.

Create a Financial Business Plan

It’s time to build a financial plan for the next 12 months, and once we’ve done that, we can look at the cash flowing in and out of your business to create an effective strategy.

We will assess your known income for the next 12 months and any estimated work, quotes or upcoming work, and when you will receive this income.

We will then assess your costs, such as business rates, utilities, taxes and rent. If you employ people in your business, we will also need to factor in wages, any increases, employer’s national insurance and pension contributions. If you need to employ more people throughout the year, you will need to estimate their salary and any potential costs.

Once we have the income and outgoing figures, we can work out your potential profits per month. We will need to factor in taxes and create a plan to save this each month so that you do not fall behind with HMRC.

It’s essential to consider other outgoings, that come out of your profit, such as corporation taxes, loan repayments, vehicles and your own wages or dividends.

Cash Flow Problems? We Have Solutions for Business Owners!

To properly anticipate how much cash your business will need for the next 12 months, you will also need a cashflow forecast. This has a similar structure to the financial plan above, but now we’re looking in depth at how the cash flows in and out of your business.

For example, you may issue an invoice to a customer today, but it might not get paid until next month. So the income will appear in your financial plan in this month, but the cash won’t come into the cashflow forecast until next month.

The cashflow forecast will also reflect other payments in and out of your business, such as dividends or drawings, taxes, grants coming in or loans. If there isn’t enough cash coming in, we will need to help you find more ways to increase your income.

How Can I Increase My Income?

If your cashflow shows that you aren’t making enough money for the business to pay the bills each month, you need to focus on getting more income, and fast. Firstly, and the simplest of all, you will need to check that you’re charging properly for your products and services.

Do you have capacity for new customers? Can you sell other products to existing customers? You could have the best product or service in the world, but if no one knows about it, they won’t buy it. Create a marketing plan, and a sales plan and attract some fresh custom for your business.

How Can I Get Paid on Time?

You might be doing all the work, and sending invoices out, but customers aren’t sticking to your payment terms, and you spend time each month chasing payments that you need to keep offering your services. At Insight Finance Solutions Ltd, we become your virtual finance department, and certainly don’t mind playing “bad cop” when it comes to chasing those pesky late payers.

Using the right accounting software for your business needs is a must, Xero accounting software can help you to make sure you get paid more quickly! As Xero Silver partners, we love bringing the simplicity and efficiency of the accounting software to our clients. Find out more about Xero here.

How Can I Cut Costs?

If your business isn’t generating enough income, it’s time to get ruthless. Can you cut personal costs, such as TV subscriptions, unused gym memberships or that new pair of shoes that you needed for a recent Zoom meeting?

Go through your personal and business bank statements, or your accounting software and review all of your business costs, if they’re not generating a return, you don’t need them. Look at software subscriptions too, and ensure you are on the right package for your needs.

Look at the efficiency of your business processes and automate wherever possible. It may also be time to consider whether you need the amount of employees that you currently have.

Update Your Plans

Once you’ve identified ways to increase income and/or reduce your personal and professional costs, you can add these to both your financial plan and your cashflow forecast. If you’re unsure on your plans or whether it will be enough, this is where we can also help! We LOVE helping our clients to see their way to success and fall in love with their finances. Book a call with us today to see how we can help you.

What If It’s Still Not Enough?

If you’ve done all of the above, and you still can’t plug the gap in your cashflow, now’s the time to look at alternatives such as payment plans with debtors or additional funding, although you need to ensure that there will be a plan in place to effectively pay this back.

If you really don’t have enough cash to continue, it might be time to make the difficult decision of closing your business. There are 2 options available to you.

Can I Sell My Business?

This may be an effective way to exit from your business, whilst ensuring that your customers and suppliers continue to be looked after.

When selling your business, you are likely to be paid a lump sum, based on a professional valuation of your business, and quite often business owners continue for a few years as a consultant, and still take an income.

Xero have a great article on successfully creating an exit strategy and selling your business.

If selling your business is not a viable option, you could look at voluntary liquidation, this is where your company is legally wound up, and the insolvency practitioner will manage the whole process for you. We can also provide assistance to you and your business during this process.

We’re Here to Help Business Owners

The most important thing to do when you’re worried about your business is to take control of the situation. We’re here to support you and your business, and to help you make a plan, so please do get in touch with us today! Contact us to arrange a time to chat.