Since 2021, we’ve seen a continuous increase in the cost-of-living and 2022 saw inflation reach a 40-year-high, affecting the affordability of good and services, writes Sinead Campbell from AdviceNI.
Unfortunately, 2023 will be another difficult year for businesses across Northern Ireland says Sinead Campbell, Head of Money Debt and Quality at Advice NI, as rising inflation and energy pushes up operating costs and reduces customers spending – putting businesses at risk of experiencing financial strain.
Sinead adds, “The unfortunate reality is that we’re seeing businesses close every week, and for industries such as the hospitality sector, it’s been a constant uphill battle.
“Hospitality was amongst those hit hardest by the pandemic and now the industry has gone from one crisis to the next – everyday they’re facing price increases, shortages of cash flow and issues retaining staff as many can’t afford to increase wages in line with the cost-of-living.”
Advice NI’s specialist Business Debt Advisers have dealt with over 123 cases during 2022, managing £5.5m of debt covering 380 agreements, signalling that there is often an available solution for businesses trying to deal with their finances and debt.
Sinead adds “Over the past few years, many businesses took out loans to survive and as a result are struggling with repayments and high interest rates. We want businesses to know that they’re not alone, support is available, and closing your business is not the only answer.”
Sinead’s 6-step-plan to help take control of business debt
Understanding your Cash Flow
Understanding your cash flow is essential for a business to run efficiently, for example – a company may have a high profit margin but still low cash flow, which can lead to financial difficulties. One way to mitigate risk is budgeting and forecasting – make a habit of doing a 12-week forecast including cash receipts verus cash expenditure to determine net cash flow. You’ll have much better control over your liquidity and won’t be caught off guard with cash flow – a forecast is also an effective way to manage your books and keep on top of what’s owed by others.
Prioritising Payments
If your business is struggling to make repayments, it can be helpful to list your debt and begin to categorise them into priority, non-priority, and emergencies – as the consequences of not paying some debts can often be more serious than others.
Examples of priority payments would be your rates, rent, tax, utility bills, or certain suppliers and loans. You can categorise non-priority debts where the consequences of missing payments are less severe. For example, missing an unsecured debt such as a credit card repayment. An emergency could be for example you are facing court action, disconnection by a utility provider, loss of an asset or closure.
Dealing with creditors
Many people find it intimidating to contact creditors and tackle the problem head on. They fear it might make the situation worse by admitting there is a problem to the. However, contacting your creditors is a great place to start if you’re concerned about missed payments or missing payments in the future due to a change in your situation. As part of its support services, Advice NI’s Business Debt Advisers may also be able to negotiate with creditors on your behalf.
Improving Your Cashflow
Whether you are a sole trader or medium business, if you are struggling financially, you should look to maximise your cashflow. Tips to improve your cash flow include looking for areas to cut back or save – these can come from improving your credit control, negotiating with suppliers on pricing or review your own pricing structure. Additionally, businesses can review their business model and look at reducing stock levels and increasing efficiencies.
Credit Controls
Cash flow is crucial to businesses to ensure they have enough cash to run their operations. Credit control is the process of managing accounts and invoices that are yet to be paid, and by regularly monitoring these, businesses can improve their cash flow and avoid financial difficulty.
Tips to improve your credit control include, always setting clear credit terms with suppliers – these make it easier to oversee late or missed payments and invoice quickly and accurately.
Finance schemes
Support is available for businesses, including financial assistance and specific initiatives to help with starting up, managing or growing a business. If you’re unsure what support you’re eligible for, NIbusinessinfo.co.uk is great place to start. Their business support finder can help you find local publicly funded and not-for-profit sources of assistance and covers all aspects of funding such as small business rates relief, mentoring programmes, government backed incentives and information on grants from InvestNI.
Business owners can also browse our website, www.adviceni.net/money-debt/business-debt, for full details of the service, and our Money Talks hub which offers a host of useful online business factsheets and letter templates, as well as tools and information such as a budget planner which can be useful for revenue forecasting and, an energy comparison tool detailing supplier tariffs throughout Northern Ireland.
Advice NI and the Independent Advice Network is made up of 64 members and more than 300 advisers across Northern Ireland, all providing free, impartial and confidential advice. Struggling businesses can call Advice NI on the Freephone helpline number 0800 915 4604 or email [email protected] where they can speak directly with an adviser between 9am and 5pm, Monday to Friday
