Dealing with uncertainty – tips for business owners

Dealing with uncertainty – tips for business owners

Whether you’re in full lockdown, restricted trading conditions or back to ‘business as usual’, there’s still real uncertainty for business owners. We’re trading in challenging times at present. And knowing what step to take next is a key worry. We know that you invest more than simply time and money into your business. It is more than a job but part of your identity.

So, how do you get more clarity around your future plans? And how do you work on the short-term future of the business, when sales, income and cash are in short supply?

Focusing your efforts in the right places

Planning the next business move is difficult at the best of times, but it’s doubly problematic when we have so little clear idea of what a post-COVID19 business world will look like.

It’s difficult to plan when we don’t know what will be possible. What regulations will be in place once you can begin trading? Will the market have changed dramatically? Will you be able to trade over borders and continue to be an international operation? Will you have enough cash to actually operate?

As a business owner, you’ll be continually thinking of new business-critical issues to add to this list – but the reality is that you CAN’T control all these elements. This sense of mounting uncertainty is likely to raise your stress levels and make you more anxious.

So, how do you overcome these worries and find a practical solution?

Try to focus on the things you can control:

  • Identify the things that matter to the short and long-term success of the business
  • Find the things you can control and over which you have some influence.

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It’s too overwhelming to try and work on everything at the same time. Instead, try to focus on the one thing you can achieve each day.

  • Review your overheads and costs – one way to reduce your cashflow worries is to reduce your spending. Look at your controllable overheads and see if there are ways to negotiate better terms with suppliers, cut down on expenses or pause any subscriptions.
  • Talk to debtors and creditors – if you can bring down your aged debt, that will help your overall financial health. Talk to any late-paying customers and agree when these debts will be paid. And talk to suppliers about extending payment terms, if possible.
  • Consider alternative revenue streams – if your current business model doesn’t work well in lockdown, are there other online services that you could diversify into? Any new revenue streams will help to bolster your income and cash position.
  • Update your website and marketing – having a great online presence is vital during this crisis, when most goods and services will be purchased online. Give your website a refresh and make it easy for potential customers to find and buy your services.
  • Catch up with your team – maintaining contact with your employees is vital if you’re going to nurture team spirit. The more engaged your team is, the easier it will be to embrace change together.

Talk to us about other strategies for dealing with uncertainty.

If you’re uncertain about the impact of COVID-19 on your business, please do come and talk to us. We’ll help you get in control of your finances, prioritise the right elements of your business and find a strategy that prepares you for trading in the post-coronavirus market.

How healthy is your working capital?

How healthy is your working capital?  

We all know that cash is king when it comes to business success, but what exactly is ‘working capital’ and how does this financial metric help measure the health of your business?

Working capital is made up of the cash and assets that are available in the business to fund your operations and keep you trading. It’s worked out by taking your current assets (the things you own) away from your current liabilities (the things you owe to other people).

So, why is working capital such a critical metric?

Having the liquid capital needed to trade

It’s possible for your business to be busy, successful and profitable, but for your cash position to still be in poor health – and that can have a serious impact.

If you can’t readily convert your assets into liquid cash, it’s a struggle to meet your cashflow goals, pay your bills and fund your day-to-day operations. But with the optimum level of working capital, you strengthen your balance sheet and put the company in a solid financial position.

To achieve this healthy level of working capital you’ll need to:

  • Proactively manage your cashflow – cashflow feeds your working capital by pumping liquid cash into the company and keeping the balance between assets and liabilities in a strong position. But to achieve this, it’s vital to achieve a positive cashflow position, where your cash inflows are greater than your cash outflows. This means getting paid on time, lowering your outgoings and keeping a close eye on your ongoing cash position.
  • Monitor and forecast your financial position – running regular financial reports helps you stay in control of your finances. With careful monitoring and forecasting of your cash position, you can ensure you don’t end up in a negative cashflow position, without the requisite working capital to trade and fund the next stage in your business plan. Cloud accounting software and business intelligence apps have made it easier than ever to create up-to-date, real-time reports and run dashboards that show your key metrics.
  • Use additional finance when required – if working capital is looking thin on the ground, then additional funding may be needed to bolster your balance sheet. Short-term finance options (such as overdraft extensions or invoice finance) and longer-term business loans can be needed to keep working capital on an equilibrium.

Talk to us about optimising your working capital

Working closely with your accountant is vital if you want to promote the ideal level of working capital in the business. We can help manage your cashflow, monitor your financial metrics and provide access to additional finance and funding when your capital needs a boost.

Get in touch to start maximising your working capital.

The benefits of

The benefits of creating a holding company  

Once your business gets to a certain size and turnover, there’s real value in assessing the company structure and how to make things more tax-efficient.

Setting up a holding company is one way to start creating an ordered and effective group structure. And by moving any surplus cash up from your trading company to your new holding company, you protect your profits and can, potentially, reduce your tax liabilities.

Separating your trading and investment

When all your surplus cash, profits and personal shares are wrapped up in one single company, that can often cause problems further down the line. With all your eggs in one basket, there’s an inherent risk built into your company structure and, in a worst-case scenario, if the business fails, you could end up losing everything.

But with separate trading and holding companies, held within a defined group structure, you can begin to protect your company and your own personal interests.

To start the process of creating a group structure:

  • Create a new holding company – a holding company is the ‘parent’ at the top of your group structure. This entity is entirely separate to the trading business where your shares are held and will sit at the very top of the structure, with your trading company and any other subsidiaries beneath it.
  • Transfer your trading shares – the next step is to transfer your existing trading company shares over to the holding company, in exchange for shares in the holding company. This gives you control over the holding company, but also enough share rights to also control the trading business as well.
  • Move your profits – excess cash can be moved from the trading company to the holding company in a tax-efficient manner, which protects any profits by ring-fencing them within your newly created holding company. And if the trading company were to fail, for whatever reason, these profits are protected and safe.

As your business interests grow, you can add further subsidiary companies to this basic group structure, presenting an organised structure to the local revenue office and also reducing the potential risk within the wider business.

Talk to us setting up a group structure

If you want to protect the long-term future of your business and investments, we can help you create a robust group structure – safeguarding the future of your business and the profits you’ve built up.

Why use Xero? The benefits of cloud accounting

Why use Xero? The benefits of cloud accounting

Xero offers your business a simple, yet powerful, way to manage all your finances in the cloud.

With Xero as your core finance system, you get real control over every element of running your business, from basic bookkeeping right through to efficient online invoicing, live bank feeds and detailed financial reporting. And that’s not all…

A beautiful business platform

Xero is also a fully functioning business platform, with an open architecture that lets you plug in online payment solutions, time-tracking apps or job-management tools. So whatever sector you are in, there is a range of apps to customise your Xero system.

With Xero as your cloud platform you get:

  • A mobile way to check your numbers 24/7 – with online access from any device
  • A paper-free office environment – with secure storage of your documents in the cloud
  • An all-in-one cloud platform – with a host of features, apps and third-party solutions

Find out more about the benefits of cloud in this Xero TV video

Talk to us about switching to Xero

If you want an accounting system that is also a highly flexible business platform for running your company in the cloud, talk to us about switching to Xero.