We are into an exciting New Year but one fraught with risk.
Our economy, shown by the recent GDP figures, is marginally contracting and we might be facing a double dip recession although the Government are forecasting very modest growth this year.
The crisis in the Eurozone rumbles on and if this is not sorted out we face the very real risk of another credit crunch. We might be comforted that our banks are not as exposed as others on the European mainland but should a European bank fail then we will not be immune from the fallout. Europe would be plunged into recession and this would damage us all.
On the brighter side we have the Queen’s Diamond Jubilee celebration and the Olympics and I believe that these will give a boost to moral and encourage growth here in the UK so let’s not be too gloomy!
Whatever side of the coin you look at there is no denying this year is likely to very volatile. For the business owner this is very challenging when making plans for the future.
But some key steps can make all the difference:
- Budgets need to be very closely reviewed and flexibility is crucial. Don’t be afraid to revise your budget during the year to take account of changes in demand. Monitor actual performance against your budget on at least a monthly basis and don’t just look at income. Make sure you are maintaining your margins especially gross and operating profit.
- Keep extremely tight control over overheads.
- If you purchase new assets make sure that the potential return warrants the investment.
- Credit control is crucial! Make sure that your credit procedures are watertight. Chase up outstanding debtors at a very early stage. You want to be at the front of the queue if things are going wrong. Send invoices at the same time as delivery of your goods or services. Don’t wait ‘for the end of the month’ to send out your invoices.
- Thoroughly check out the creditworthiness of new clients.
- Keep cash flow under constant review. Perversely there tends to be more business failures as the economy comes out of recession. The reason? Answer; lack of cash to finance a growing order book! Traditionally your bank would help out with an overdraft but the banks are much more conservative now so if you see a need on the horizon speak to you bank at an early stage.
- Ensure your managers have the skills to really understand how to analyse figures and business plan accordingly. Without a financial background this can be daunting for many and some guidance can really help.
So, let us all keep our fingers crossed and with proper planning and control I wish everyone an exciting, happy and prosperous New Year.
