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How can my business survive the cost of living crisis?

cost of living crisis

Can my business survive the cost of living crisis...

This time last year most businesses were starting to recover with the lifting of the last Covid19 restrictions.

Since then, businesses have been busy trying to get back to ‘normal’ and repair their battered finances.

A year on and what was a bad situation has got a whole lot worse. Soaring fuel and energy costs. Rising inflation. Rising interest rates. Difficulty in finding staff. Falling consumer confidence.

It all adds up to a worrying time and recent research found that almost a quarter (23% to be exact) of business owners feared their company wouldn’t survive the current financial year.

So what can you do to give your business the best possible chance to avoid bankruptcy and survive the current cost of living crisis?

This article will answer that question by outlining 7 simple strategies that any business owner can use to bring in more cash and reduce the likelihood of their business failing.

Let’s get started…

Strategy 1 : GET THE CASH IN

One of the most obvious ways to make sure there’s enough cash in the bank to pay the bills is to get your customers to pay you on time. Every time.

Cash collection is seen by many as being a difficult and time-consuming task so tends to be left. This is a big mistake. To avoid running out of cash you need to find a way of collecting it.

You can discover lots of practical ideas on how to do this in our article HOW TO IMPROVE CASH FLOW?

Every one of the 11 practical ideas are easy to implement and won’t cost you a penny…..but will get you better results….

Strategy 2 : KNOW YOUR CASH POSITION

With the increasingly gloomy economic outlook it’s imperative to hold onto the cash. With cash you can pay the bills. Without cash you’re out of the game.  Remember – you cannot control what happens in the UK economy or the wider world but you can focus on controlling the controllables within your power…. your business

Given all the uncertainty it’s more important than ever that you have a cashflow forecast. A cashflow forecast tells you what your cash position is now AND what you can expect it to be over the next 13 weeks.

If you discover, thanks to the cashflow forecast, that there is a cashflow problem on the horizon then at least you have time to take corrective action.

That might mean agreeing payment plans with suppliers or HMRC or, alternatively, arranging some external finance.

Simply by having a piece of paper which clearly shows what the bank balance is likely to be in the coming months is massively helpful and will certainly reduce the number of sleepless nights.

Strategy 3 : REDUCE COSTS

With costs rising it is important and sensible to remove any waste or unnecessary costs. By keeping costs lean and cutting out the waste it means more cash is kept in the business.

The 3 BEST ways to reduce the costs in a business are: –

·         INCREASE EFFICIENCY – eg a factory streamlining a manufacturing process so fewer raw materials are bought and/or less staff time (& cost) is needed.

·         CUT WASTE – stop paying for services (eg IT software) that aren’t used any more

·         PAY LESS – find a cheaper price BUT ONLY if the quality is not reduced

You can find many practical ideas on how to do this in our article HOW CAN I REDUCE MY BUSINESS COSTS AND INCREASE PROFIT?

Strategy 4 : INCREASE PRICES

Even with prices rising so rapidly many business owners are loathe to put up their prices. They’re worried about losing customers.

BUT, any business who holds off putting up their prices is making a big mistake. That’s because, unless a business meaningfully increases its prices then their profit margins will shrink. That in turn will impact (in a bad way) the bottom-line profit and consequently the bank balance.

Increasing prices can feel scary so here are some possible strategies to help….

·        Selective increases – Increase prices for certain customer groups (or certain products/services) to see the results before increasing prices elsewhere – eg start with prospective customers before existing ones.

·        Communicate the value of what you do – so that customers can see what they’re getting is good value for money when compared to the price they’re paying.

·        Increase the value given – Improving the current offering to benefit the customers can be used to help justify a higher price. As mentioned above, the new price represents a fair exchange of value – higher benefits in exchange for a higher price. 

Strategy 5 : MAXIMISE CUSTOMER NUMBERS

The best way for a business to get more new customers is to convert more of the sales leads it already gets. 

This strategy will be more cost-effective than just focusing on getting more sales leads….which is what most businesses do.

By improving the sales conversation rate a business will win more customers (which will in turn lead to higher sales and profits) BUT, without spending any  more money on marketing.

Possible Strategies to improve sales conversion

·         Speed All sales leads are followed up very quickly – ideally within 10 minutes.

·         Nurture campaign – Aims to build a relationship with prospects / sales leads who didn’t convert immediately BUT over time some will eventually say ‘yes’.

Strategy 6 : STOP CUSTOMERS LEAVING

It is not easy and certainly not cheap to win new customers.

It is very important, therefore, for a business to avoid losing all the good customers it already has. Improving customer retention means customers will stay for longer….and the longer they stay the more they will buy and the more profit the business will make.

Possible Strategies to stop customers leaving

Common strategies revolve around improving the understanding of the needs and wants of its’ customers…and then doing better at meeting them. For instance by :-

·         Keep in touch – calling customers from time to time to maintain the relationship and highlight any possible issues which can be quickly sorted and not left to fester.

·         Exit survey – ask customers who have left (or will be) why

·         Customer survey – ask existing customers how happy they are & how you can do better.

Strategy 7 : GET CUSTOMERS TO BUY MORE

If customers are becoming harder, and more expensive, to win then it’s important to focus on the customers which you do have. To increase
sales and profits a business can either get their existing customers to buy more often OR buy more every time they do buy.

Possible Strategies to buy more often

Common strategies revolve around understanding the needs of its’ customers…and then doing better at meeting them. For instance by :-

·        Compelling offer – using offers with deadlines give customers reasons to come back sooner

·        Contacting customers – phone customers and book in earlier return appointments

Possible Strategies to buy more every time they do buy

·        Add on buys – Where you’re offered something which is complimentary to what you’ve decided to buy. Eg McDonalds staff ask ‘would you like fries with that?’.

·        Trade ups – A strategy often used in coffee shops and looks to get you to upgrade your initial purchase. Eg staff will say ‘just 20p more for a large coffee’.

·         Impulse buys – Many retailers have impulse buy items (often confectionary) near the tills to tempt shoppers into adding an extra item into their basket at the last minute.

IN SUMMARY

To minimise the likelihood of your business succumbing to the cost of living crisis and failing, it is imperative that you have a clear plan of action AND a cashflow forecast.

The plan needs to focus on maximising profit and collecting the cash.

The cashflow forecast will tell you if there’s a possibility that you’ll run out of cashflow in the next 13 weeks….which gives you time to do something about it.

Considering each of the 7 strategies in isolation makes it so much easier to get clarity on what you could do, helps you decide what is the best way forward and what you’re actually going to do. 

If you’d like to discuss any of the above or would like a chat to see how we can help, drop us an email to [email protected] or call one of the team on 0161 410 0020.

 

 

 

Disclaimer
It is important that you take professional advice before making any decisions based on the information that you learnt here. While every effort has been made to make sure it is accurate it cannot be precisely tailored to your personal circumstances. This article is for general information only and no action should be taken, or refrained from, as a result of this information.  Professional advice should be taken based on specific circumstances in each individual case.  Whilst we endeavour to ensure that the information contained in the article is correct, no liability will be accepted by Krystal Clear Accounting which is a trading name of Kim Marlor Associates Ltd or damages of any kind arising from the contents of this communication, or for any action, inaction or decision taken as a result of using any such information.

What are Bank Feeds and how do they work?

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In short, bank feeds create a digital link between your business bank account and your accounting software, such as Xero or QuickBooks.  

This means bank transactions are automatically downloaded into the accounting software. This simple piece of automation, completely removes the need to manually input every bank receipt and payment into the accounting software. 

Having bank feeds in place, saves a HUGE amount of time bookkeeping. That’s because it completely removes the need to manually input bank transactions into the accounting software. 

Saving time bookkeeping isn’t the only benefit for the business…. 

 

 

How can my business survive the cost of living crisis

What are the main benefits to a business using bank feeds?

Bank feeds automate, what was previously, a time-consuming task of entering all the bank transactions into the accounting software. 

 This saves the business a HUGE amount of time (& money) spent on bookkeeping.  

With bank transactions being downloaded from the bank every day, it means it’s quicker and easier to keep the bank balance in the accounting software up-to date. 

With the accounting software up-to date, the bank is updated daily which gives you a clearer, real-time view of your business’s cash flow.  

This makes it easier for you to plan your cashflow, and take action to improve it. 

There is always the risk of errors being made when data is being manually inputted into the accounting system. It is often time-consuming to find and correct any errors. Also, if an error is large then the Profit & loss and Balance Sheet reports will be inaccurate and potentially misleading. 

 Automating the bank transaction entry previously manual process, reduces the risk of errors being made and ensures that the bookkeeping records and reports are accurate. 

How to Link Your Bank to Xero

Ensure that your bank account is set up for online banking. This feature is typically available from all major banks. 

Log into your Xero account and navigate to the banking section. Select ‘Add Bank Account’ and follow the prompts to search for your bank. 

After adding your bank account details, you’ll see an option to set up bank feeds. Click ‘Agree’ to the terms, then securely log into your online banking portal through Xero to authorize the connection. 

 

Are Bank Feeds Safe & Secure?

Yes. 

Firstly, having bank feeds in place ONLY means bank transactions are downloaded into the accounting system. They do NOT give anyone else access to the business bank account. 

 Secondly, XERO has various security measures in place to give you a piece of mind that your financial data is safe and secure: 

 

  • Encrypted Connections: Xero uses advanced encryption technology to secure the data transmission from your bank to Xero. This means your sensitive information is encrypted during transit and cannot be intercepted or read by unauthorized parties. 

 

  • Compliance and Standards: Xero adheres to high standards of data security compliance, thus ensuring that its practices meet or exceed industry security standards and regulations. 

 

  • Regular Renewals: To maintain a high level of security, XERO requires that the bank feed connection is renewed every 90 days. This process is straightforward and helps ensure that the integrity of your financial data is always protected. 

 

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KIm Marlor the MD of Krystal Clear Accounting
krystal clear accounting

In Summary

In short, having bank feeds really saves businesses time and money on their bookkeeping.  

 They automate and eliminate what is otherwise a time consuming and error prone manual process.  

 Bank feeds is just one of the ways technology can be used to help business owners improve the financial side of their business.

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