Being a business owner during the current economic crisis is stressful. You don’t know what is around the corner, which has led to several businesses closing down on the high street.
However, high-interest rates and inflation on many materials and products have affected more than just retailers. Businesses that rent out offices are also affected by interest rates, meaning they have to raise their costs for their services.
Due to the recession, consumers are spending less on non-essential items and keeping them to themselves in case of emergencies. This affects businesses and their cash flows. To counter this, companies are now looking to take out bank loans to keep their companies afloat. The total gross of business lending in the UK is at an all-time high. If you own a company and know you’ll need a bank loan, follow this guide.
Create A Credit Line As Quickly As Possible
Having a credit line is strongly advised for businesses. Banks are more reluctant to lend companies money, and if you have a line of credit with your bank, you are more likely to be trusted with a bank loan.
A discussion will decide the maximum amount you can borrow when you try to borrow money from the bank. Once you have done this, you don’t need to worry about sorting a line of credit when you need a loan.
Look After Financial Records
Looking after your financial records is another must for a business owner. Sometimes, especially during a recession, you must look for ways to cut costs. That means stopping hiring or, in extreme cases, laying off some staff to reduce wage bills.
If you don’t keep on top of your finances, it could lead to you making rational decisions. That can affect your company’s future and put you at risk of keeping it afloat. If you have the data in front of you, you can protect your business and stop yourself from making rational decisions.
Detailing all finances spent and what comes into the company is essential. Tracking your finances from a personal and business perspective is vital during a recession. Keeping these documents lets you see which clients are generating the most revenue for your company. You can decide to upsell to them or bring in similar clients.
Understand Your Company’s Cash Flow
As a business owner, you need to know many things, one of which is company cash flow. Many companies don’t understand their cash flow, and that isn’t good, especially during a recession.
If you know the recession is only going to get worse. Understanding the revenue you generate and the money you spend is a way of being proactive to avoid disaster. For example, if you have previously taken out a loan and are paying it back, you can pay more towards this debt if interest rates are high, reducing the amount of money you have to pay in the future.
Another thing you can look at is your spending on company software. If there is software you are sure your employees are no longer using, you can cancel the subscription to this program to reduce your expenditure.
Make Sure You Keep Up With Company Invoices
You should always manage company invoicing. At least once a week, review your company invoices to ensure they are correct. Ensuring our customers/clients are paying you the right amount is important because if you spend more on materials, your cash flow will decrease.
If your employees or clients continue to miss invoices, you should always consider speaking to them. Have a professional discussion with them to understand why they are missing payments. There may be a valuable reason. If numerous clients are not paying on time, you may need to introduce a late payment fee. That way, you can keep track of your cash flow and ensure you get paid on time.
Before you consider sending out late fee charges, ensure there are no errors when sending these invoices. Also, ensure this doesn’t disrupt your business too much, and get credit insurance to protect your business from customers or clients who cannot afford to pay you.
Summary
Keeping on top of your company finances is essential during a recession. Managing your cash flow and understanding what comes in and out of your business is important, essentially when costs are tight or increasing. Make sure you keep on top of your invoices to ensure clients/customers pay on time and the full amount.
