Business Owner’s Toolkit

As no doubt every business owner is aware, UK PLC is currently navigating unprecedented financial waters. The impact of COVID and the Ukraine invasion means that businesses have seen increases in utility costs, staff recruitment and retention issues, rising interest rates, rising costs of raw materials, high inflation, falling exchange rates and customers having less disposable income.  All of these issues are outside of the control of most business owners and there is very little that can be done in the short term other than ensuring that a business is in the right shape to navigate these choppy conditions.  FRP Advisory, as a national firm of business advisors and restructuring experts, has significant experience in helping business owners steer through these issues into hopefully calmer conditions.

We have listed below several questions that business owners should ask themselves to fully understand their position and what support or further advice may be required.

Key risks – What do you see as the key risks impacting on the business outside of the cost of living / energy prices that can’t be controlled? These may be such things as recruitment and/or retention of skilled staff, failing machinery, operational issues etc. Once these have been identified, can they be addressed so management time can be concentrated on the business rather than firefighting.

Management Information – Does the business produce timely management information to include a rolling 13 week cashflow? Is future capital investment required? If so, how is it to be funded? Where are the cash flow pinch points? How are they being addressed? Do the cash flows contain reasonable sensitivities to understand the impact on facility headroom in order that options can be considered.  Accountancy support can be sought to help produce this information in order that informed decisions can be taken.

Margins – Has the business been able to pass on price increases through the last year? Is there an opportunity to revisit pricing structures? What leverage does the business have over its customers to improve trading terms.  Proactive advice can be sought from professional advisors to review trading terms and conditions.

Debtors – How efficient are the business’ credit control systems? Are there any concentration or bad debt issues? Are any customers on stop?  Should they be? Are there any signals that customers may be experiencing problems? If so, should credit limits be revisited?

Directors loan accounts / other emoluments – Has there been any movement in the Directors’ Loan Account recently? Have dividends been declared recently?  Were there adequate reserves to allow for any dividends? Have they been properly documented? Professional support may be required to regularise the position.

HMRC – Does the business have any Crown arrears? If so, can a ‘time to pay arrangement’ be agreed to lessen the impact on immediate cashflow? Are all returns submitted?  If not, are payments based on assessments and would submission of a return reduce the liability.

Cash – Conservation and conversion are key points to focus on. Can creditors be stretched or prioritised, can payment plans be agreed to keep within current cash facilities?

Cost cutting – have all costs been reviewed? Are all staff and items of manufacturing equipment being fully utilised? Are there any specific service lines that are underperforming that could be mothballed? Accountancy support may be required to understand the impact on specific service lines or contracts to help base decisions.

It is vitally important for business owners to have the right professional support to help them continue to move forward and to deal with any further storms that may be faced. This can be from a business’ trusted accountants, solicitors or external advisors such as FRP Advisory who will complement the existing professional support network business owners have immediate access to.  Such support can be accessed via your accountant almost immediately and in most cases an initial discussion is without charge and designed with the sole purpose of putting a steadying hand on the tiller and helping the business owner make informed decisions.

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