The ACCA guide to surviving the slowdown
With the UK economy taking a downturn there is never a more important time to ensure proper financial planning . ACCA (The Association of Chartered Certified Accountants) gives best accounting advice through their 20 top tips to prepare your business for a slowdown
The global credit crunch has hit the UK economy hard, meaning it’s a worrying time for business owners and directors throughout the country.
“Small businesses need to keep a tight rein on cashflow, make sure they can pay and be paid on time and keep a dialogue open with their bank,” says Allen Blewitt, Chief Executive of ACCA. “While it’s tempting to worry about the global situation, a level and sensible approach is needed during these difficult times.”
But while there’s not much you can do about customers spending less than they did last year, there is still plenty you can be doing to ensure that your own business is in as good financial health as possible.
ACCA offers the following 20 best accounting advice tips to reduce the impact that the credit crunch and economic slowdown may have on your business:
Good financial planning is crucial. Don’t be scared of facing and making difficult business decisions and putting them off until tomorrow.
Start questioning early your credit facilities with UK retail banks
Maintain a regular and meaningful dialogue with your bank and also with your accountant if necessary to ensure you receive the best accounting advice.
Review your bank charges. Maybe you could switch accounts and find a better deal with a new bank? Could your current bank give you any special deals as a loyal customer?
When it comes to rolling-over banking facilities, beware of hidden charges and factor those into your financial planning
Review all your direct debit arrangements for the business and for your personal finances
Small businesses need to keep a tight rein on cashflow, make sure they can pay and be paid on time
Try to clear credit card debt. But if you use them, try to pay without incurring interest and pay off balances before charges are incurred
Chase your cashflow and if you can’t make payments, then let your creditors know why and when they can expect a payment
Pay special attention to cash flow forecasts and to monitoring cashflow. Ensure management accounts are up-to-date, and that all key financial reconciliations are done, reviewed, and outstanding items cleared
Tighten up credit control, cash collection procedures and treasury management
Look carefully at your forward sales book, and the timing of future orders
Consider carefully current and future customers and 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 those businesses which import / export, consider foreign exchange hedging and where this could be relevant to your business
For December year-ends, be clear about stock and work-in-progress valuations and get early audit agreement to valuation principles. Do the same for all ‘’fair value’ items on your balance sheet
Look critically at staff requirements/recruiting strategy. Instead of taking on new staff, you could consider paying for more paid overtime
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 in awarding pay rises and in setting up staff incentive schemes. Ensure such schemes relate as much to profitability and cash generation as much as to growth. Be alert for performance distortions related to incentivisation schemes
Critically evaluate directors own financial drawings from the business. Are they appropriate in the light of current and future profitability and cash generation? Cars? School fees? Home improvements? Holidays? Insurances?
Revisit the Risk Register as a matter of priority. Are all risks included, particularly financial/liquidity? Are risk mitigation measures still valid? Are mitigation owners being proactive in their responsibilities?
