February 2010
Beware of Green Shoots!!
At this point in the economic cycle it’s quite natural for businesses to get a bit more bullish about their future, and why not!
• We are now embarking on the pre-election good news
• Consumers have pinched a bit in 2009 and are more eager to carry out their lifestyle spending plans
• Those in employment, especially those in the public sector, will have had a relatively easy ride, unless they have borrowed up to the hilt on credit card debt.
• The reduction of the mortgage rate will have eased financial pressures for many
• With a bit of luck the Euro problems will not affect the position of sterling... too much?
But a double dip recession is an each way bet and the availability of credit likely to be questionable for many businesses.
I must confess I don’t see too many green shoots – but there will be some in select sectors and for those well managed and well advised businesses with distinct competence and added value propositions and services.
But it’s also a sad fact that more business fail as we come out of ‘recession’ than fail as we go into one.
That’s easy to understand why, but difficult for business owners to accept. In difficult times they run down stocks, worsen their credit rating because they have being paying late and, in short, they run out of cash and credit and so cannot take advantage of the upturn. Of course the banks will always unfairly carry the blame.
If they were public companies they would be having rights issue to put cash back into the business. But for the entrepreneur, that’s not always a ready option, much less an acceptable proposal. Life somehow isn’t always like that!
So a few do's and don’ts as we go into 2010,
1. Make sure your accountant is doing a lot more than producing accounts to minimise your tax bill. Get him to produce monthly accounts and make sure he talks them through with you and that you implement his suggestions.
2. See your bank manager regularly – not just when you have a financial hiccup – let him see the good and bad news and get him onside with your plans
3. Be strict about your cash flow – if you cannot afford it – don’t do it – if you can make sure the plan is well thought through
4. Get impatient if progress is slow – be ruthless, if it isn’t working out drop it before it becomes a major problem
5. Manage your debtor ledger properly – it’s probably your biggest asset – how often do you take control - or is it left to somebody who really needs your help and guidance?
6. Keep researching your market – who is doing what – what’s the effect of the internet on your business, is there a better way of promoting your products?
7. Above all make sure your business is not totally reliant on one single customer – no matter how good they may be – they do have a choice of supplier you know.
I am afraid for most businesses it is going to be another difficult year – but if you need any help with raising finance or collecting debts or if serious problems are on the horizon, please speak to me sooner than later. We have been helping business in Sheffield and South Yorkshire through thick and thin for 125 years now – there aren’t many business support firms that can say that!
Jeremy Priestley is the Managing Partner of The P&A Partnership and Managing Director of P&A Receivables Services plc.
If you think that your business would benefit from with a financial health check please speak to me on 0114 275 5033. |
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