With a cost of living crisis, possible winter blackouts, and a potential upcoming recession in 2023, we are living through very uncertain times in the UK.
These problems, along with the recent economic and political upheaval, mean that it’s more important than ever for business leaders to take a common-sense approach with regard to managing their future finances.
So how can business owners thrive, and even grow, in 2023? We asked top Chief Financial Officers from our network to outline four priorities to make the year ahead work for your organisation.
Uncertain times lead to more caution when spending. Budgets may be cut. But having less money available doesn’t always mean cutting supplies, investment or staff numbers.
Now is a time to focus on improving efficiency instead. There are a number of ways of getting better value from your expenditure.
Shop around, and don’t be afraid to negotiate. Inertia can lead to overspending, so ask questions of all purchases, whether new or recurring, to see if you could get a better deal from your current supplier, or maybe a competitor.
Join forces with other companies in your area, industry or supply chain to benefit from economies of scale when ordering. Alternatively, make the most of organisations such as chambers of commerce, or other groups that offer special rates and member discounts. It’s good practice to trim the fat by eliminating unnecessary purchases, but before cutting investment in areas that could hurt your company’s potential, see if there aren’t smarter ways of buying the same for less.
Improve cash flow
The profitability of your business only helps when it’s backed up by sound cash flow that allows you to operate.
In an uncertain economy, it’s vital to give your operation the chance to survive lean times, and the best way is to ensure money sits in your own account and not that of your debtors.
Get tough with long-term outstanding debts. If you’ve got sound Ts & Cs in place, be brave and start enforcing them on habitual late payers. Some businesses will pay as late as you allow them to, and it doesn’t take much pressure or persuasion to coax them into paying. Sometimes it might take the threat (or even the reality) of legal action, and while it can seem daunting to risk upsetting customers, it’s better to focus on those that honour payment terms anyway.
If you’re more laissez-faire with small print, introduce new paperwork for your sales. Draw up reasonable payment terms and make them clear, make it easy and even desirable for customers to pay on time (early payment discounts, for example), or take advantage of services such as invoice discounting to gain earlier access to cash that’s rightfully yours.
Decision-making carries an inherent element of risk at the best of times, and economic uncertainty for the foreseeable future only makes it tougher. You can bring the odds back in your favour by making the most of data-driven analytics. With recent advancements in software, and the fact that many organisations carry out a lot of trade online and through their own website, FDs have access to more information than ever.
It doesn’t require expensive, specialist software, though those are certainly useful. Even the most recent updates to Excel have built-in functions that help build projections in more detail, using more sources than ever.
Data collection doesn’t even need to be intrusive to your customers. There are many ways of collecting information – and pooling it into one central resource – which helps measure demand, trends, inefficiencies, and opportunities.
And with the rapidly growing rate of adoption, in 2023 it’s a case of jumping into data analytics soon or falling behind your competitors that already have.
Be prepared. The last 12 months were full of unexpected moments, especially politically, and the year ahead will almost certainly contain more of the same. Amidst all the unpredictability, it’s best to get your business ready and able to react quickly to change.
Start with drawing up ‘what if?’ scenarios for various possible situations. Think about possible Brexit outcomes, for example, and how you will need to react. Then assess your organisation’s vulnerabilities and strengths, and what action you’ll take if a headline breaks – whether it poses a danger or an opportunity.
Put together a plan for an unexpected event. Calm heads prevail, and having cover-all policies in place will mean, if necessary, you can begin making moves that’ll give you extra time to react and give you an advantage over the competition.
Once you’re running a lean, cash flow-positive business, you’ll be in the best position to move quickly when situations arise.
In playing out scenarios on paper, you will be able to identify barriers to change, whether that’s a lack of resources, broken or bloated lines of internal communication, unclear leadership lines, or inefficient critical paths. Right these mistakes now and even if no situation occurs which requires immediate action, your organisation will still be in better shape overall.