Winter is coming. With the pandemic decimating the global economy since March 2020 and Brexit just around the corner, many business owners are feeling even more uneasy about what lies ahead in 2021, than they did in early 2020.
Battening down the hatches and hoping for the best is one (arguably optimistic) option, but what practical steps can you take to maximise your company’s survival and successfully navigate the stormy waters ahead? Sean Hackemann, founder and director of Specialist Accounting Solutions, shares his top five business survival tips for 2021:
Cashflow forecasts are an essential planning tool for businesses, especially in these uncertain times. We recommend a 12-16 week cashflow forecast, updated every two to four weeks. This can be done with a simple Excel spreadsheet, such as the free template on our website.
The forecast will help you think about and identify potential cash crunch points ahead, so you can devise a plan and take early evasive action, instead of being caught unaware.
If you want to take the exercise a step further, use scenarios. For instance, initially prepare a base case (ie this is what we expect to happen) and then a worst-case scenario. The key number in each of these is your minimum cash figure.
Making money is hard enough, but if you don’t get paid on time it can kill your business. That’s why you need to constantly stay on top of your debtors. Take swift action when your payment terms are exceeded: call your customers; write to them; hassle them; set them clear deadlines and demand full payment. If your customer has the choice of paying two similar suppliers with the same terms, they inevitably pay the one who chases them harder for payment.
You will have probably seen stories about businesses pivoting (ie changing their business model) during the pandemic, helping them survive, even thrive. This is where quality, accurate management accounts are key, giving you the right information at the right time.
Use key performance indicators (KPIs), such as gross profit and EBITDA. You should know the most appropriate KPIs for your business. Identify them. Measure them. Consistently.
If your business has several income streams, your management accounts should tell you how profitable these are and where there might be cost savings. This information and the KPIs are vital when deciding which income streams to push harder or scale back, to create your own pivot.
Raising capital to secure or stabilise your business could be critical in the short to medium term. While the Governments’ bounce back loan scheme (BBLS) has a very simple and quick application process, the CBILS application process is much more involved. This is where a specialist adviser who supports you in preparing the numbers can make all the difference. Beyond that, a well-connected adviser can identify and approach alternative debt or equity funders to provide more options.
Getting funding is almost impossible without accurate and timely management information and that requires a quality finance team, however big or small.
If your finance team needs support, requires more resource, or leadership so you concentrate on running your business, then consider financial outsourcing solutions: from book-keeping to part-time FD support.
Outsourcing avoids the red tape of hiring more staff and is a low risk, low commitment approach to manage these complex issues. A good outsourcing service can be flexed up or down, depending on the demands and challenges your business is currently facing.
We trust you find this guide helpful. Having a positive attitude is good, however taking these practical steps will help navigate your business in the stormy waters ahead.
Sean HackermanSpecialist Accounting Solutions is a niche firm of accountants specialising in advisory, virtual FD and financial outsourcing services. We work with ambitious entrepreneurs and management teams, who need specialist accountancy support to achieve their goals. Subscribe to our ebook series The Next Step featuring ambitious entrepreneurs and the challenges in growing their businesses.