According to the Bank of England, a huge third of small businesses in the UK are highly indebted, with many at risk of insolvency. Not only a problem that’s unique to the UK, as a result of Covid-19, global debt rose to $32 trillion in 2020.
Running a business has proved challenging over the past couple of years, and the ability to adapt to changing scenarios has been crucial. Following multiple lockdowns, various safe management measures and shifting precautions being put in place, many companies have found it difficult to cover expenses and keep business running as usual. Commercial locksmith will save some of the expense for small business.
Now, as businesses aim to move towards a ‘new normal’, taking close care of finances will be pivotal to not only success, but also survival. So, how can businesses best stay on track financially?
Table of Contents
Outsourcing work
Recently, the gig economy has seen rapid growth. Where businesses have had to make cuts, an increase in the hiring of freelance contracts has occurred. Ultimately, full-time employees cost businesses more. Even in months where business is slow, you still
have to pay employees their monthly wage. What’s more, when it comes to short-term workers, you aren’t obliged to provide paid holiday or pension contributions.
All of these factors contribute to why outsourcing work can be a cost-effective alternative to hiring full-time employees. So, if you have jobs that are only required for a temporary period of time, hiring a contractor could be the perfect solution.
Keeping an emergency fund
If there’s one thing the pandemic taught us, it’s the importance of having an emergency cash cushion to fall back on. No one could have predicted the havoc Covid-19 brought, and for businesses that weren’t prepared financially, coping with the pandemic was far more difficult.
If possible, it’s a good idea to aim to keep a cash reserve large enough to cover at least 3 months of essential business expenses. Ideally, this would be sitting somewhere between 3 – 6 months to give you enough backup to cover emergency situations and unforeseen events.
Look after the pennies
It’s also important to continue making savings where you can, even if these savings may appear small and unnecessary. Don’t neglect your finances! Are there areas within
your business that you’re overpaying? Do you need to consider switching energy providers? Should bulky contract payments be stopped? Are you being fooled by hidden fees for services? As the proverb goes, look after the pennies and the pounds will look after themselves.
Borrow responsibly
When cash is low, there can be the temptation to jump into business borrowing for quick access to funds. However, whenever you choose to take on debt, it’s important to do so with a careful and considered approach. That’s not to say that all financial products are bad. On the contrary, business loans can provide lifelines for small businesses, if used correctly.
Whenever taking out business funding, it’s important that you select a trusted provider that will have your business’s best interests in mind. They will help to ensure you borrow responsibly, and make sure you don’t take on debt that you won’t be able to afford to repay.
Consider leasing business assets
Many business owners make the mistake of purchasing fancy, top of the range equipment and machinery, viewing it as an investment. The problem with this is that business equipment is notoriously expensive, and these purchases can lock a large amount of your capital in assets.
Alternatively, you could consider leasing assets and making small monthly rental payments. These more manageable payments are only required during the lease term. As soon as you’re finished with the equipment, you can choose to return it to the provider. If leasing isn’t what you want, why not buy second-hand equipment? Often, second-hand machinery works just as well, and can be bought for a fraction of the price.
Office spaces
During the pandemic, a majority of the workforce was forced to shift to remote working. Depending on your business type and sector, you should seriously think about whether renting an office space is still worthwhile financially? If productivity wasn’t impacted when employees worked from home, and if your staff are happy to work remotely, this could be a huge area of savings for your business.
Of course, you won’t benefit from the same office vibes and company culture could be impacted, but not if you actively take steps to keep employees communicating with video calls. And remember, it doesn’t have to be forever, just until you get your business’s finances back on track.
The bottom line
There are so many ways your business can save money as we move into 2022 and beyond. We’ve only listed some starting points for you to think about, but when considering your budget for the year ahead, do some research into further ways you can cut costs and build up that financial cushion for your firm.
