Ten ways your business can survive the economic downturn.
Figures released today from The Office for National Statistics (ONS) show the UK economy failed to grow in the final three months of 2019.
Growth in manufacturing was hardest hit as it reduced for the third quarter in a row while the service sector slowed during the election.
Although recent surveys have shown that the economy has improved in the first quarter of 2020, British businesses need to be prepared for an uncertain year ahead.
Commenting on the statistics, Suren Thiru, head of economics at the British Chamber of Commerce, said:
“The UK economy lost momentum in the final quarter of 2019 due to weaker figures for industrial production.
“UK manufacturing remains a weak point for the UK economy with sluggish global demand, tightening cashflow and disrupted supply chains dragging on activity in the sector.
“Despite breaking the Brexit deadlock in Westminster, a faltering global economy and a challenging domestic business environment could limit the UK’s growth prospects – particularly if the lack of clarity over post-transition trading arrangements persists.
“The upcoming budget must take swift and tangible steps to boost growth and productivity across the whole of the UK, including incentives to release investment and easing upfront business costs.”
Despite the negative outlook, there are ways for SMEs to prosper in an economic downturn. We look at ten ways British businesses can weather the storm:
Invoice customers promptly, they are more likely to pay quickly if you invoice on time. Dedicate time to complete invoicing or outsource to an external company. It is also vital that all invoices are correct.
- Early payment schemes
Offer an early payment scheme or incentive for customers with discounts for those paying earlier than the agreed invoice date.
Ensure accounts are accurate, up-to-date and in order. You should have access to debtor books, know your budgets and cash flow forecasts.
Have procedures in place to deal with debt recovery, the longer a debt remains unpaid the longer it will take to collect. Chase unpaid debts the day after they are due.
Having a strong relationship with suppliers means there will be extra flexibility with your arrangements. A good working relationship will enable you to negotiate terms and if needed secure credit arrangements.
Leasing a commodity such as IT equipment or company vehicles means you pay in smaller instalments rather than a lump sum. It can work out slightly more expensive, but lease payments are often classed as business expenses and part of the VAT claimed back.
- Credit check
It is always worth running a credit check on new customers, if they flag up as poor credit then you are likely to be chasing payment down the line. Is the customer worth it?
- Postpone expansion plans
Cash flow problems can occur for businesses looking to expand or grow. By delaying the expansion then cash flow can be preserved for a period before re-investigating the expansion.
- Alternative finance
If growth is a priority, aside from the high street route, there are finance companies such as www.v4bprofessions.co.uk which arrange short-term unsecured business loans. These can free-up cash flow and help sustain the growth you want.
Reducing business costs is straight forward, only spend on necessary purchases, do you need it, and can you afford it? Plump for the lease option if needed.