Credit crunch: What does it mean for you?
Jan 25 2008
In the current global economic climate, small business owners are likely to be concerned about the consequences of the credit crunch. If 2008 is as tough a year as some predict, it will mean that confident planning is more necessary now than ever.
Penny Proffit teamed up with the Association of Chartered Certified Accountants to bring you ten quick tips for survival.
• Start by questioning your credit facilities with UK retail banks and pushing for a better deal where possible.
• Maintain an open dialogue with your bank and your accountant.
• Review your bank charges. Could you switch accounts and find a better deal with a new bank? Could your current bank give you any special deals as a loyal customer? Watch out for hidden charges and factor those into financial planning.
• Try to clear credit card debt. If you do use them, aim to pay without incurring interest and clear balances before charges are incurred.
• If you are lacking cash and cannot make payments, give your creditors a reason and let them know when they can expect their money so that you do not lose any favourable terms.
• Consider current and future customers carefully and assess their ability to pay – do not simply rely on credit ratings.
• Pay particular attention to investments and major capital expenditure. Appraise rigorously and consider the extent to which such items can be rescheduled.
• For import or export businesses, consider foreign exchange hedging and where this could be relevant to your business.
• Consider, where relevant, temporary or fixed term assignments but make sure you have weighed up the pros and cons against full-time recruitment.
• Be cautious when awarding pay rises and setting up staff incentive schemes. Ensure such schemes relate to profitability and cash generation as much as to growth.
Allen Blewitt, chief executive of ACCA, adds, ‘It’s important to address these factors because they are fundamental to business success. It will be interesting to see what the banks say about the state of their lending books when the reporting season kicks off in earnest in February. But a New Year survey from one high-street bank said that British businesses are ready to “tough out” the year ahead.’
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