“Managing cash flow in a crisis can be challenging at a time when customers and suppliers are nervous too.”
Whether you think Kwasi Kwarteng is inept or a radical reforming genius, he has certainly rocked the boat.
While the Government U-turns itself dizzy, it is left to business owners like you and me to cope with the fall out and try to manage cash flow in the crisis.
What I would give now for a period of calm!
We have lurched from Brexit, into Covid, into the war in Ukraine, and now this. Nobody said running a business would be easy, but we certainly need to be made of stern stuff to cope with all the challenges that have been thrown at us in recent years.
Let’s look on the bright side – we’re entrepreneurs after all
Let’s start with the budget itself.
The lowering of National Insurance by 1.25% for both employers and employees will save many businesses hundreds, if not thousands, of pounds a year. If we combine it with the Employment Allowance, up to 40% of businesses won’t pay any NICs at all from November 2022. That’s got to be helpful.
The cancelling of the rise in Corporation tax rise on profits exceeding £250,000 might seem irrelevant to most CaFE users, but for businesses making less, it is an indication that we can expect Corporation Tax to stay stable or go down under this Government. Again, I’m all for that (please don’t U-turn on that one too, Liz).
The cuts to NI and income tax, the energy price cap and Stamp Duty cuts, which have caused uproar, should take some of the pressure off us to increase salaries as our teams will keep more of what they earn.
That, of course, is providing inflation and interest rates can be brought under control.
Which is a big if.
What can I do to manage cash flow in a crisis?
I don’t pretend to know the answers to the macro-economic problems.
What I can do, though, is share some of the things that we are seeing users of CaFE doing in recent days. I hope, in amongst these, you can find something useful.
Many are revisiting cash flow forecasts or, in some cases, making a cash flow forecast for the first time (a warm welcome to our new subscribers).
The best way to give yourself some sense of control in a period of uncertainty is to make a forecast. CaFE allows you to model different scenarios and we are seeing this used, particularly by customers with import or export requirements, and also by businesses with borrowing.
A minority of users keep some of their money in foreign currencies, and they are forecasting this in CaFE too.
Outside of cash flow forecasting, it appears more businesses are paying up front for materials, no doubt to secure supply and negotiate better rates.
Cash balances are also going up as businesses start to buffer cash reserves.
Other ideas that we hear being mooted include fixing the cost of finance and sourcing more items locally.
Managing cash flow in a crisis can be challenging at a time when customers and suppliers are nervous too. The ability to forecast and monitor cash in the bank accurately can be the difference between success and failure. If you think one of our CaFE ambassadors can help you get more from CaFE, we’ll be delighted to hear from you.
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