The Credit Crunch
In these difficult economic times with negative growth and the increased prospects of job losses, it is important to ensure that you make adequate plans to get through the current problems and arrange your affairs in such a way as to minimise the impact of The Credit Crunch. That way, you’ll be in a good position to maximise your earnings potential when things start getting better.
Below we have provided you with some handy tips as to how you can achieve this. For more advice, please contact us and we can help you achieve these goals.
What should I do to ensure my business survives The Credit Crunch?
1) Budget
It’s amazing how many businesses don’t bother to produce any form of financial plan. It is especially important in tough economic times to ensure that you know exactly what you expect to sell and how you spend your money so you can identify in plenty of time if there are any funding problems that you need to plan for by speaking to your bank. We can help you with this process.
2) Keep track of how the business is performing
If you don’t keep track of your costs books then you won’t know if problems exist. There is also a legal requirement to keep your financial records up-to-date and by doing this you’ll be in a good position to defend yourself from any investigation into your business records by HM Revenue and Customs. Our offering, Crunchers, will help you achieve this. Either you can use our easy-to-use software yourself to keep your books correct at a very low monthly cost of £25/month or we can do your book-keeping for you and free your time up to run your business. Contact us for more details.
3) Insurance as well as assurance
By keeping accurate books you can be assured that your business can withstand any scrutiny from the taxman. You can further protect yourself from further costs in the event of a tax investigation by subscribing to our Tax Investigation Protection Service where, for a relative small annual fee, you can insure that if and when you’re unlucky enough to suffer an investigation all of your fees will be covered. Contact us for a no obligation quote.
4) Tax planning
Don’t pay any more tax than you have to. The way in which you pay yourself from your limited company can make a huge difference as to how much tax you pay. We can help plan your affairs in the most tax efficient manner so that you keep more of your hard-earned money.
5) Carry out a business health check to review your current activities
This should consider factors such as your customer satisfaction levels, suppliers and their performance, products and services in comparison to other offerings, people and skills base and processes, procedures and equipment. We offer a service where we can perform a financial health check on your business to see what opportunities exist for savings.
6) Look after your cash
There’s one thing that you need to remember – “Cash is King”. Most businesses fail, not because they’re unprofitable, but because they run out of cash. It is important that your credit control procedures are robust so you get paid on time for the goods and services you offer your customers. It’s your money, so don’t be embarrassed about asking for it. Doing a weekly cashflow forecast will ensure that any funding problems are identified before they arise so that you can plan accordingly. If you need financial help, there are a number of options open to you including borrowing money from your bank under the Enterprise Finance Guarantee scheme recently introduced by the government.
7) Involve your team
We’re all in this together. Your employees are stakeholders in your business and their jobs are on the line. Employers, more than ever, require a workforce motivated to overcome the current economic challenges. Wherever possible, directors need to involve employees in discussions concerning potential restructuring issues. The biggest overhead for many businesses is their staff costs and it is important that you make the most of this resource in difficult economic times. Employee input is often the source of innovative ideas. Open communication lines may alleviate some of their concerns, and while not in itself motivational, it minimises the downside impact of forced changes.
8) Make overheads as variable as possible
Many companies feel that a cost-cutting strategy will make them incapable of taking advantage of the upturn when it arrives. However, a strategy of trying to ride out the storm when the sales outlook remains uncertain and the banks inflexible is a high-risk strategy. As an alternative strategy a move to variable or outsourced costs will provide a means of reacting quickly to further downturns, or driving growth during an upturn. A review of overheads should identify: true fixed cost, which costs could be outsourced and which costs are critical to maintaining customer service levels. The objective of this exercise is to move costs that have traditionally been fixed to a variable/outsourced category. This will provide companies with more flexibility to react to market needs.
9) Dealing with spare capacity
Expensive spare office or manufacturing capacity is often a symptom of trading in the current marketplace (although landlords may be prepared to consider a rescheduling of payments in the current climate). However, is there another way of utilising this capacity? It is highly likely that competitor companies in your region are also struggling in the current climate. This may open an opportunity to merge the operations onto one site, thereby maintaining customer service levels, saving central overheads and utilising the capacity of one site.
10) Financial planning and timing
Underlying any restructuring strategy should be a detailed financial forecast based on very conservative assumptions. Associated with this forecast should be an action plan, which will trigger specific actions if certain forecast assumptions are not achieved. It is essential to plan ahead so that strategies can be agreed well before a problem arises. By thinking ahead and using realistic assumptions, managed solutions can be implemented.
What can I do to ease the financial burden on me personally?
1) Budget
If you do nothing else, make a budget. It may sound dull, but writing down exactly where you money goes each week, as well as what you have coming in, is the single most important thing you can do. Afterwards, you can evaluate where to cut spending and where you can make your money work harder for you.
2) Bring your mortgage cost down
Falling interest rates should mean cheaper mortgages for those on tracker or variable-rate deals. Homeowners with fixed-rate mortgages will not be affected by the recent rate cuts, but when these deals expire homeowners should be able to move to cheaper mortgages, but it is increasingly difficult to secure a good deal without a hefty deposit of 25% or even 40% of your property's value. You might be better off sticking with your standard variable rate and, if possible, use any spare cash to overpay your mortgage. Through our financial services partner, Premier Plus Ltd, we can help you get the best mortgage deals to suit your circumstances.
3) Supermarket shopping bills
The weekly food shop is an easy area to save money on. Britons waste a third of the food they buy so rediscovering the joys of leftovers and freezing spare food can save you a huge amount.
4) Taxing matters
The last thing you need to be doing when money is tight is handing more money to the taxman than you should. But millions of people are tax losers and don't even know it. We can help structure your personal affairs to optimise your tax position and ensure that you’re getting everything that you’re entitled to. It's possibly worth checking you are receiving the all the tax credits you might be eligible for and are in the correct council tax band as well.
5) Money to burn
Domestic fuel bills look set to top £1,000 a year for the average family this year. There are two simple ways to bring this down: switch to the cheapest provider and to use less energy. Energy efficiency isn't just about saving the planet, it can also make you better off.
6) Insurance
Insurance is becoming increasingly important as the economic outlook is less certain. But as well as making sure your income and mortgage are covered, along with essentials such as car and home insurance, it makes sense to check you are not paying too much for any cover. Savings of hundreds of pounds can be achieved on motor or home insurance simply by shopping around.
7) If you don’t ask, you don’t get
It’s amazing what savings you can achieve simply by asking for a discount. Most retailers will be prepared to do deals in the current climate so learn how to haggle!
8) Get online for less
Online shopping lets you compare prices more easily and look for discounts using search tools - but it's important to make sure you broadband is not ripping you off. Long contracts, download limits, "free" deals that are nothing of the sort and charging you to call technical support are all tricks that are used. You should also compare prices to ensure you get the cheapest deals for your usage patterns.
9) Socialise for less
Having fun doesn't have to cost much. There are a host of options that let you have fun with friends at little cost. It's important to make sure you still enjoy yourself when money is tight, because locking yourself away from friends and family only increases the temptation to splurge cash later. Using supermarket vouchers for free days out is a good way to save money. Tesco, for example, allow you to use your Clubcard points to pay for days out at many attractions across the country.
10) Save wisely
Two working Britons in five don't have enough savings to last a month out of work. While money is generally better employed paying off debts than sitting in a savings account when times get rough, it is essential you have access to some emergency cash. And if you do have savings, you might as well earn as much from them as possible. Compare savings accounts to find the best deals and put all the money you can into a tax-free ISA.
11) Beware expensive credit cards
Money being tight is no reason to cut up your credit cards. They are a flexible way to borrow and are great for tiding you over for a few days or spreading the cost of a big item if you don't have savings to fall back on. However, you have to use them smartly. Don't carry a balance on the cards long-term if you can help it, and if you do have a big balance, try and get it onto a 0% balance transfer card. If that's impossible, switch to a card with a low standard rate. If you are using a card to pay for big items, try and use either a card with an interest-free deal on initial purchases or one that offers you cash-back on spending.
12) Make sure your current account offers you the best deal
Despite popular wisdom about "all banks being the same", there is a huge difference between the best and worst current accounts. The top deals on overdrafts charge less than 10% interest (or are even interest-free for a fixed period), while there are several accounts still paying more than 5% interest on positive balances. Some bank accounts will also let you keep up to date with text message alerts on the current state of your balance as well as online deals letting you check your finances any time of day or night - making managing money easier.
13) Check your credit status
To make sure you qualify for the best current accounts and credit cards, you need to make sure your credit record is in the best shape it can be. Your credit report will be used by banks and other financial institutions to decide if you are eligible for the best deals or even any deal at all. You can check out your report for free online and also take steps to improve your credit rating - something that is increasingly important as banks tighten up lending criteria. Alternatively, contact us and we will obtain your credit report for you.
14) Phone savings
There are now more mobile phones in the UK than people and on top of this most homes have landlines as well. Combine all of this and there are massive savings to be made by moving to the cheapest deals, and you can even take your number with you.
15) Build, not buy
The property market is in bad way - as house prices fall month on month and mortgages become harder to come by. Most people agree that long-term house prices will be back, but for now it might more sense to keep renting or extend a your home rather than buy a new one.
16) Use spare rooms for profit
If you have a spare room in your home, you can rent it out for up to £4,250 a year tax-free. But be careful, any money they give you for bills or food could become taxable if it means they pay in total more than the tax-free limit.
17) Money for old rope
There are plenty of other ways to make money from your home. De-clutter your home with online auction sites, car boot sales, pawn brokers and auctions to get rid of things you don't need any more and make money from them.
18) Earn more
There is a simple way to make yourself more comfortably off that you can do without economising, earn more. This can be done through either negotiating a pay rise or by supplementing your income with another part-time job. Many of these take up less time and pay better than you might imagine.
