Quarterly News

Ten tips for coping with the downturn

Many businesses feel their cash resources are squeezed in the current downturn. Here are some ideas to make your funds stretch further:

1. Clearly state your sales credit period on your order confirmation documents and sales invoices, and enforce this period by chasing customers as soon as their payment is overdue. You can also encourage customers to pay quickly by giving small discounts for completing their payment within your credit period.
2. Send out your invoices for completed projects as soon as the work is completed. Don't wait until the end of the month to bill. If the project is running over several months agree a series of stage payments with your customer.
3. Analyse your entire stock for age and quality. Can any of the slow moving goods be sold off at a discount to generate cash? Would cutting the number of lines you sell reduce your storage and handling costs?
4. Review your supplier agreements for on-going services such as web support, telecoms, security, energy, or cleaning. Can you renegotiate any of these contracts to get a better deal?
5. Talk to your neighbouring businesses. Is there a common landlord you could collectively approach to change the payment terms of all your leases from quarterly rent in advance, to monthly payments?
6. To reduce your total wage costs offer your staff flexible hours or part-time working. A salary sacrifice scheme can also produce savings if it is implemented properly, with HMRC approval. Tax free benefits such as the use of bicycles, child-care vouchers, or pension contributions are swapped for salary, and the national insurance and tax savings are shared with the employees.
7. Link the incentives for your sales force to the profit per unit sold, or to the speed with which the customer pays for the order, rather than to the volume of units sold. You may also want to fix a threshold of minimum profits or cashflows that must be achieved before any sale bonuses are paid.
8. If you need new equipment, look for second-hand kit sold-off by less fortunate businesses. Alternatively, investigate leasing or hire purchase arrangements. These methods of acquiring equipment may be more expensive in the long term but they are a practical solution where you can’t borrow the money you need from the bank to fund the full outlay in one go.
9. Review your VAT position and the schemes you use. Does the flat rate scheme for small businesses still deliver a bonus for your business following the change in rates on 1 December 2008? Where you run several companies, including them all in one VAT group may improve VAT management.
10. Keep your company's taxable profits below the ‘large company’ threshold of £1.5 million by timing expenditure and bonuses. Once you are a large company you must pay corporation tax due in four instalments starting within the accounting period rather than in one lump nine months after the end of the accounting year.

If you would like to discuss any of the above please contact us.

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