No one has a crystal ball. Nor could anyone have predicted how turbulent a time we – individuals and businesses – would face over the last two and a half years. The COVID-19 pandemic has changed everything and we’ve had to learn to embrace that change; agility has become a business’s best friend.
The true test of a company’s mettle isn’t thriving in a stable economy, it’s weathering a storm – though ‘storm’ is downplaying it. Brexit, COVID-19 and now the war in Ukraine have all collided to form a perfect storm of biblical proportions for the UK’s – and the rest of the world’s – economy. Food and fuel prices are sky-high, the cost-of-living crisis has us worried that we won’t be able to afford to heat our homes over the winter, interest rates and inflation are soaring, and industries are facing unmanageable staff shortages as they try to navigate the changes that have wreaked havoc for our workforce.
But, as there’s calm before a storm, so will there be after. It may be a little optimistic to say that the sun is shining – there may be a bit more thundery rain – but what we have now that we most certainly didn’t have two years ago, is the knowledge garnered from hindsight. We are able to look back over the past two years and draw learnings from the worst and the best times. This will give businesses and individuals far greater capability to be in control during the next phase of the country’s recovery from COVID-19. And control is key, especially in such uncertain times.
With so much out of our control – a pandemic, war, the economic climate, even extreme weather in recent months – and the knock-on effects to things like supply chain, it’s important not to get overwhelmed. Unpredictability is part of running a business. Highs and lows come with riding the storm and it’s how you hold the ship steady that counts.
Most crucial to staying afloat is taking command of what you can control. Amidst other uncertainties, doing so will ensure you retain a solid grasp on how your business is running.
Cash is king
It may sound obvious, but the first thing to take control of – and have a clear understanding of – is your finances. You can avoid any unnecessary debt by having good cashflow and this will clearly dictate what you might need to tweak and adjust in your spending. Ensure you stay in the green by keeping your future projections in the green, cutting back where necessary.
~Novel Serialisation: Heavens Fire~
A projection is a movable feast
Once you have your forecasts in a state where they give you confidence in your decisions, don’t sit back and assume that will be that. You can’t undertake a projection one day and then sit back and expect it to still be relevant in 12 months’ time; it should evolve and you should adapt the business accordingly, pivoting where necessary. Even in positive economic times, projections should be constantly monitored and nurtured. Think of them like plants – if you don’t care for them every day, they won’t survive.
Information remains critical
Projections, coupled with historical data, give you the power to make calculated decisions about what you don’t know, based on what you do know. In today’s business world, this means planning for the future by first examining the past. You should be taking detailed financial reports and tracking up-to-date information about your business operations so that you fully understand its working parts. These will be a useful reference for how your business has performed in the past and adapted to previous situations. Whether it’s insights into your demand cycle, parts of your business that may be more vulnerable to fluctuation, how you pay your staff or your margins as a result of price increases, information – and how to use that information – is critical.
In contrast, a lack of information will immobilise your forward planning, allowing doubt to sink in and most likely strangling your ambitions.
Beware the big bad wage inflation
Employees are increasingly worried about making ends meet and a jump in inflation to double figures in July – the highest we’ve seen in 40 years – means they’re turning to employers for financial support. But in such a volatile economic climate, giving out wage increases could prolong inflation. It’s a balancing act giving staff enough of a boost to help them through the current cost-of-living crisis, without accentuating the problem.
There are, fortunately, alternative routes to explore, aside from just wage increases, from one-off bonus schemes to tax-free support. Benefits in kind, childcare vouchers, fuel allowance support, gym memberships, maybe even buying your staff lunch once a week – there are numerous ways in which businesses and individuals can be supported over the coming months.
Focus on staff retention
With financial difficulties come staffing issues, and businesses are feeling the problematic pain point of plugging skills gaps and battling against the tide of extremely overworked employees. But it’s far more expensive to hire talent than it is to retain them, so a key focus should be keeping your current staff happy. Salary will always be a key element of what individuals need, but so will practical benefits, a culture of collaboration and feeling valued by their employer. Communication is critical – and it’s a two-way street. Keep staff involved in business decisions and listen to what they want and need. By doing so, you will best understand their emotions and be able to act accordingly, whilst protecting your best asset as they help you navigate the business landscape, which is likely to remain unsteady at least until the end of the year.
Be clear on your objectives and don’t be afraid to ask for help
A period of financial turmoil can be a good time to assess what your business does and what your short- and long-term goals are. Doing so will keep you sensitive to when your business decisions may be going off track, whilst highlighting areas that could be improved. This could be broader knowledge of your sector and researching how other businesses are faring, to give you an indication of where you could or should be. Holding comprehensive information about your accounts is extremely important but, unless you have knowledge of other businesses, you will only have your own information to go by.
This is where seeking the support of business advisors in the marketplace, who speak to hundreds of businesses every year, will be invaluable. These professionals understand how economic cycles work, the different quirks of each business and they can input into your projections and forecasts. They can give you an idea of how other businesses are tackling shrinking margins, as well as a sense of the standard figures in your industry, which you can use as an invaluable sounding board for your forecast.
At Monahans, this isn’t the first time we’ve been through challenging times and economic uncertainty. We’ve worked shoulder to shoulder with many of our clients for years, using our vast experience and knowledge to see them through these difficult times. Our door is always open to discuss how we can help you to stay in control of your business.
No-one can predict what is coming next for the UK – or for the rest of the world – but, taking an educated guess, we’re not out of the woods yet. A lot is out of our hands but businesses that equip themselves with the right information to control the controllables, rather than panicking, will be the best placed to succeed in an uncertain and volatile environment.
The next few months are going to a worrisome time for some, if not most. If you need business support or just a shoulder to lean on, get in touch with our expert team today https://www.monahans.co.uk/contact-us
By Simon Tombs
Simon Tombs is Managing Partner of Monahans, the south west’s leading accountancy and business advisory firm. Having been at Monahans for more than two decades, Simon’s extensive experience – from acquisitions for foreign governments, to helping small, local businesses – serves him in his role leading the firm’s Professional Practices function. He advises a range of owner-managed companies on all aspects of their businesses and financial practices, specialising in helping businesses become more effective in their operations through Monahans’ cloud accounting services.
