As the emergency Budget edges ever closer, firms must not forget that business must go on. It is now more important than ever to make sure the cash keeps on flowing, despite the uncertainty ahead in terms of cuts, funding options, and tax breaks for UK businesses.
Bibby Financial Services UK chief executive Edward Rimmer said of the current stalemate: “The outcome of the emergency Budget presents small and medium-sized firms with numerous questions about how this will affect the economy and the knock on effect this may have on their business.
“In order to start reducing the nation’s £166 billion deficit, the Government is going to have to make some serious cuts to public expenditure, which could have negative ramifications for those businesses which are dependent on public sector contracts. This may force many firms to make cuts or rationalise their processes, adding additional pressure on owners and managers.
“Furthermore, plans to increase VAT to 20 per cent could also have serious repercussions for some firms as they will need to dig deeper into their pockets to pay for supplies for their business. Whilst many of the larger businesses can afford to absorb this cost, some of the smaller players, particularly in those industries which adhere to tight profit margins, simply cannot afford to subtract an additional 2.5 per cent from their profit and loss account.
“However, despite these challenges, the most successful in the market will be those who plan ahead and tighten up their processes to ensure they are in a strong position to face any changes that come their way. Cash flow is, without a doubt, the lifeblood of business - if there is no cash in the bank to pay monthly bills, meet staff wages or purchase raw materials, the business will ultimately suffer.
“Taking steps to improve cash flow can reap considerable benefits during these unpredictable times and businesses should not wait to see the content of the emergency Budget to address these issues. Firms should be identifying where cash is tied up now to spot potential ‘bottlenecks’ and act to reduce their impact.
“With 60 per cent of all firms seeking finance still being denied loans by their banks, due to strict lending criteria*, and increasing numbers of owners and managers being forced to dip into their own savings or use their own credit cards to fund their business, it is evident that access to finance remains a real issue for small companies. As a result, more firms are turning to invoice finance as a more accessible form of funding - it has been a saviour for many struggling businesses in the recession.”
Invoice finance enables businesses to unlock the funds tied up in one of their biggest assets, namely outstanding customer invoices, leading to an immediate cash injection and ongoing supply of funds into the business to ensure they are in a strong position to face any challenges that come their way.
* Research by the Institute of Directors (IoD)
