How to build financial resilience
Posted on 1st August 2023 at 11:52
When it comes to building up financial resilience small actions can soon add up. These are our top five financial resilience tips:
1) Resist the urge to discount
Don’t be tempted to join the race to the bottom when it comes to pricing as this is a surefire way of damaging your profits.
Instead look at what else you can offer your clients which will add value to them or what distinguishes your products/services and promote them rather than discount them. Being the cheapest is not always the best and can degrade the value of your offering.
2) Get paid on time
Ensuring that your customers pay you on time is essential for your cash flow. Ensure your invoices are sent out promptly and, when due, chased up so that you receive payment within your payment terms. There is software available that can help you to manage your invoices and automatically chase outstanding invoices if you aren’t comfortable doing this yourself.
It is also worth looking at your payment terms to ensure that you are giving an appropriate length of time and not excess length, for example, 14-30 days from the date of invoice is standard for most businesses.
3) Rolling cash flow forecast
Keeping an up-to-date cash flow forecast that covers a 13-week period is important for visibility. This allows you to plan for expenditure and see what you have to pay including quarterly payments such as rent and VAT. This will allow you to see any shortfalls in advance and enable you to take action to manage your debts.
4) Debt management
Managing your debt is an important part of optimising your cash flow which includes prioritising your debts and not ignoring HMRC. If cash is tight, you can look at negotiating extended payment terms with suppliers and speak to HMRC about setting up a payment plan for tax debts. You could also investigate refinancing your debts at a lower rate to reduce the financial pressure.
It is also worth noting that if cash is tight, you don’t actually have to pay your invoices until they’re due. Some people pay as soon as they receive an invoice but if that invoice isn’t due for 30 days you can wait to pay it and utilise your cash elsewhere.
5) Cost reduction
Conduct a review of your business expenses to see if there are any cost savings to be made. Review your subscriptions and software licenses and cancel any that are no longer used or needed.It’s always good to keep an eye on your business operating model and look for ways to make your business run in a leaner way (which could involve automating processes).
Finally, review your payroll overheads and what your team do. Are all of your team fully utilised? Are there any activities that would be better outsourced to save on payroll costs? Rationalising staff and changing staff job roles is probably one of the hardest things to do but can yield some larger financial savings that may be appropriate. Remember to take HR advice in advance of making any decisions that affect the people in your organisation.
Moulds Accountants offers a range of accountancy and financial services that can support businesses which can include services that traditionally may have been done in-house, such as bookkeeping, payroll and part-time finance director. We work collaboratively with you and your team to deliver these services as and when you need us. Contact us to find out more about how we can help your business.
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