Cost of Living Business Strategies
There are lots of tips out there for managing personal and business finances as the cost of living increases on what seems to be a weekly basis. Whilst we can all use our kettle less, and switch lights off, the burning question is what can we do as a business strategy that holds longevity and results, to manage the cost of living. Essentially, practical financial actions that can potentially help the bottom line.
On top of business expenditure, personal costs are increasing and earnings cannot keep pace any spare capacity – savings or expenditure on non-essential goods and services will quickly disappear.
The process of financial exhaustion holds true for businesses and individuals. Following as it does, hard on the heels of COVID lockdowns and disruption, the current economic outlook – rising inflation, rising interest rates, further energy price hikes and a possible recession – leaves little room for optimism. (We don’t mean to sound doom and gloom but there is truth in the phrase ‘Fail to Plan, Plan to Fail’)
So how do business owners and their employees, cope in the coming months?
We go through practical financial options available to businesses to weather the storm that is the cost living. From increasing prices to doubling up key suppliers, cost reviews and consolidation. The Robinsons team are on hand to discuss the business strategies through the cost of living increases and what could work for your business.
Later this month we will release an article on practical financial actions for Personal cost of living strategies – keep your eye out for that!
Business will need to achieve two goals if they are to survive:
- maintain profitability or at least breakeven, and
- stay solvent.
Below is a list of ideas to help achieve the above. Some or all could be applicable to you and your business, but either way, there are options available, and the Robinsons team are on hand to help.
|Increase Prices||When was the last time you increased your prices? If you sell goods or services that are in demand or if you offer after sales care that your competitors may not offer, then you may be able to generate additional income, and therefore profit, by simply increasing your prices.|
|Cross Sales||Could you create cross-sales opportunities by offering deals to your present clients and customers?|
|Longer Term Contracts||Could you lock customers into longer-term contracts by offering them incentives – no price increases for a fixed term for example.|
|Cost Review||A line-by-line review of your business costs is always instructive. Which costs could you reduce or replace with lower cost alternatives.|
|Renewals||Ask your accountant to make a comprehensive list of costs you settle with your business credit card or by standing order or direct debit. These costs tend to be forgotten and many renew automatically even though you may no longer use the services paid for.|
|Credit Control||Improve credit control to convert sales into cash more quickly.|
|Cash Flow||Monitor cash flow for at least the coming year to identify low points and organise funding.|
|Reporting||Produce monthly management accounts, even basic reports from most accounts software will confirm trading results (profitability) and produce a balance sheet (that will measure solvency).|
|Suppliers||Double-up key suppliers so if one increases prices or cannot supply in a timely way, you will have a reserve.|
|Competition||Keep an eye on competitors’ websites and published price lists; are your prices higher or lower, how will you respond?|
|Productivity||Do you need to increase productivity – do more or as much with fewer employees?|
|Sub-Let||Could you reorganise storage and productive capacity in your workplace to free up space that could be sub-let, creating an additional income stream.|
|Stock||Do you have slow-moving stock that could be sold at a reduced price to increase cashflow?|
|Dividends||Company directors who fund themselves with low salaries and high dividends will need to ensure that dividends payments are not made once retained profits are|
|Deductions||When considering your management accounts make sure you factor in deductions for current taxation.|
|Tax Losses||If you are forced into a loss-making period, could you change your accounting date to make use of tax losses at an earlier date?|
|Tax Planning||When did you last invest in tax planning advice? There may be an opportunity(ies) to create recurring tax savings.|
|HMRC||Approach HMRC and apply for their Help to Pay assistance. This won’t reduce taxes due, but it will help you spread the cash flow impact of payments.|
|Investments||As a last resort you may have to prioritise investment decisions and defer those that will not have a positive and immediate impact on profitability.|
|Consolidate||Approach lenders to see if present loans or asset finance arrangements could be replaced with less expensive options.|
|Limited Liability Partnership||If you are still trading as a self-employed person or in a partnership, would it be prudent to incorporate your business or covert to a Limited Liability Partnership to protect your personal assets, particularly your home?|
If you find any of these ideas useful and need help with implementation, contact the Robinsons team. If you would like to brainstorm other ideas to better meet your business needs, speak to the Robinsons team.
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