It’s no surprise that the coronavirus has had a huge impact on the business world, not only in the UK but globally. During this unprecedented time, SMEs are having to make key business decisions in order to survive.
The SME community makes up 99% of the UK’s private business landscape so ensuring its survival is critical for the UK economy. Therefore, we have put together some helpful tips for SMEs on how to survive a crisis.
Cash Flow Management
According to the Office of National Statistics, cash flow is responsible for up to 90% of business failures. It is crucial that businesses understand their finances and manage their cash flow effectively, especially in the current climate. As stated by the statistic above, failure to do this could mean the end of your business.
By managing your cash flow effectively, you can ensure you pay your staff on time and meet other overhead commitments. Understanding your cash flow also allows you to create contingency plans, in the event of a crisis.
If you haven’t already, undertake an audit to allow you to understand the full extent of your finances.
You may already use data to investigate the payment history of a new customer but if you don’t, it is worth considering. When using payment performance data, ensure you have the most up to date and accurate information you can.
By using this data, you can assess the creditworthiness of your new customer and the potential risk of late payments.
Given the current situation, it is important that SMEs also understand the financial condition of their supply chain, which not only includes their suppliers but their suppliers’ suppliers.
The most important thing you can do during a crisis is communicate. Staying in touch with your customers and suppliers is critical. By having open communication with each other, you will know when any issues arise and you can work together to resolve them or come up with a contingency plan.
Most cash flow issues stem from late payments. There is nothing more frustrating than when you are expecting a payment and nothing materialises, especially if you had plans for that money. The monies tied up in your debtors’ ledger could be just what you need to keep you afloat.
If your in-house collections process isn’t working, it may be time to outsource your overdue invoices to a debt recovery agency. Whether your invoice is a week overdue or two years, debt recovery agencies have the skills and resources required to successfully recover your monies. This gives you your time back so you can focus on other aspects of your business.
Most debt recovery agencies, like us, work on a no collection, no fee basis so you only pay if they are successful in the recovering the debt.
The key to all of this is to act quickly, the faster you can get outstanding invoices to a debt recovery agency, the higher the chance of recovery. However, if you feel your business is heading toward insolvency, the key is to seek independent advice as quickly as possible. Again, the faster you act; the more chance you have of saving your business.
Our sister division, My Insolvency, has a proven track record of assisting directors of companies to achieve the best possible outcome for their business.