News and Press Articles

Didn’t I tell you that it would end up like this?

By Jeremy Priestley, Managing Partner at The P&A Partnership

July 2008

It would be rather smug of me to remind readers that for the last 5 or 6 years I have been forecasting the economy moving into the state we now find it. Whilst politicians are very eager to blame the US sub prime debacle for the collapse of the housing market in the UK and the general state of our economy, the real fact is that a credit card spree and a cheap mortgage market has been funding the governments profligate expenditure. Now the chickens are coming home to roost!

Consequently the ‘robbing Peter to pay Paul’ scenario steps up a gear; the costs of running a car is going through the roof – the motor car is becoming the new ‘cigarette tax’; with a weakened pound, the cost of the weekly shop has gone up by about 15% in the past 12 months; but the really bad news is the rising cost of mortgages – even if you can get one!

This major reduction in personal disposable income is very bad for the economy in general and creates serious problems for a whole host of businesses; construction, haulage, high street shops, estate agents, public houses come immediately to mind – the argument that they’ve enjoyed the good times and should have tucked away reserves for the bad, doesn’t hold up any more – the world is not like that these days!

So what does a business need to do at times like this? I thought the following check list might assist some companies as they move into uncharted waters,

• Firstly, dust down your business plan and start producing weekly/monthly cash flows and profit monitors. If you don’t have this information visit your accountant now and get him to set it up for you.
  
  
• Look at your debtor book and establish the extent to which you are giving credit to your customers – if on average it’s over 60 days, do something about it. Review the credit limits you are giving to all your customers. If you was some help with this telephone Scott Cooper at P&A Receivables on 0114 268 8868.
  
  
• Look critically at all your expenditure, and cut out any that’s questionable straight away – advertising comes quickly to mind.
  
  
• If you were thinking of expanding, taking on new staff, or buying new machinery think again and talk it through with your accountant.
  
  
• Make sure you pay your main suppliers promptly – and expect them to want to be paid earlier.
  
  
• Put a freeze on your own drawings, this may be the year not to take a holiday or buy a new car.
  
  
• Keep your bank manager fully in the picture and don’t exceed your overdraft limit without asking.

Some tough choices for businesses – but nobody said it should be easy. If it looks really difficult come and see me. The answers to the political problems are a little trickier – but going back to basics, and cutting your suit according to the quality of the cloth, would seem like a good starting point to me!

If you business looks as if it is starting to face some financial challenges and you think you might need some help telephone Jeremy Priestley on
0114 275 5033

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