Kwasi Kwarteng’s fiscal statement caused controversy across the business and financial world.
Despite the back peddling on the scrapping of the top rate tax, Kwarteng’s plan means it’s a real mixed bag for businesses, especially when you’re trying to understand how to manage cashflow in ‘crisis’
Let’s look at the important things to consider when managing your cash flow in the wake of the recent updates.
The good news
By lowering National Insurance by 1.25 percentage points (for both employers and employees), many businesses save money throughout the next year.
Add to this the Employment Allowance, around 40% of businesses won’t pay any NICs at all from November 2022. Again, more money saved.
By cancelling the rise in corporation tax on profits exceeding £250,000, it’s likely a clear sign that businesses making less than this will see corporation tax either stay the same or go down in future.
Meanwhile, the business energy relief scheme and cut to green taxes will save you money on your energy bill.
And, if you’re worried about needing to pay your staff more to help them cope with the cost of living, the cuts to stamp duty and income tax and the energy price cap should mean that your staff will keep more of what they earn. Of course, this is dependent on the rate of inflation and interest.
How to prevent any future problems
We spoke about cashflow in a previous blog, with all of the points made there still being completely valid.
But we’d like to emphasise the importance of a proper cashflow forecast, when it comes to avoiding any pitfalls or dangers.
Using your past data, you’ll find that you’ll be able to predict with a certain degree of certainty possible future outcomes to your business.
These forecasts can be created for any time frame you want – a week or months at a time.
Make sure you list your incomings and outgoings properly, and don’t rely on the same monthly numbers. Working in a volatile industry like retail will have prepared you for this, but it always pays to stay informed.
It’s also good to look at what your competitors are doing during a crisis. For example, more businesses are paying up front for materials, in order to secure supply and negotiate better rates.
It’s also worth building up a cash reserve, so you know you’ve got a buffer should things start to get ugly.
In times of trouble, be stringent
It always pays to be careful and take precautions whenever there’s a time of crisis. Talking to your business partners, friends, and family about their situation, and of course, making your business as efficient as possible is always the best way to deal with cash flow problems.
The ability to accurately forecast and monitor cash in the bank can be the key point between success and failure.
Talk to us about your cash flow and how we can help you get ahead of the competition, manage the budget effectively and stay afloat.