How resilient is your organisation in these tough times?

Thursday, April 27th, 2023

At Copia Wealth & Tax, we recognise that times are currently tough for a lot of our clients and contacts across a variety of sectors – so our team of team of business advisers are exploring what you as a business owner can do to ease the pain and what we can do to help with that.

Building resilience

There are plenty of businesses and households that are struggling with their energy costs, alongside recent increases in general taxation, rates/council tax, and employment costs.  

Rather than just sitting there and soaking it all up, you can plan forward and adjust your business to better cope with these changes.

Over the years we have found that whilst most business owners are resilient, the more proactive ones are flexible in their planning. 

In our experience, we recommend that you should:

• Review 2023/24 budgets to ensure you have set realistic and achievable targets and make sure you have checked your cash flow forecast carefully.
• Review your accounts receivable and chase up overdue customers diligently. It may be worth offering existing customers extended payment terms or discounts if you can afford to.
• Review your terms of business to ensure payment terms are clearly stated.
• Put extra effort into your relationships with your better customers – now is the time to make them feel important and ensure you keep them.
• Review your products and services and removethose that are unprofitable.
• Review your banking facilities and consider if they meet your current needs.
• Look at your expenses in your profit and loss account and assess if there is anything you can reduce or remove. Consider renegotiating your fixed expenses and whether there are alternative suppliers. 
• Review your main business processes (e.g., sales processing, order fulfilment, purchasing) and see if there is scope to simplify, make more efficient, or even outsource.
• Encourage members of your team to suggest ways to streamline processes by offering a reward for the best ideas.
• Consider what are the key performance indicators (KPIs) for your business and measure and review them regularly.
• Meet with your team to explain the business’s strategy and ensure they all understand and buy into it.

There is some good advice available in The British Business Bank’s Guide to building business resilience – go to https://www.british-business-bank.co.uk/finance-hub/guide-to-building-business-resilience/ to find out more.

Alternatively, talk to us to discover more about planning and resilience because we have considerable experience helping our clients with their strategy and sustainability.

Thinking of giving equity to your employees?

Providing equity to employees is quite a common occurrence in the large corporate world, but there is no reason why this type of incentive cannot be considered by smaller businesses. It provides employees with an added incentive to work with business owners to help them improve profitability in that they will then have a personal stake in the success of that business.

Where companies give shares to their employees, the employees will be taxed on the difference between the market value of those shares and the amount paid, if any. The transaction also needs to be reported to HMRC by 7 July following the end of the tax year in which the shares were issued.

It is more tax efficient for the employee if the company awards shares under a tax-advantaged share incentive scheme, e.g., the Enterprise Management Incentive (EMI) scheme or a Share Incentive Plan (SIP). Alternatively, there are other tax effective options such as growth shares.

Before going down this route it is advisable to take proper advice as there are potential pitfalls that could result in unexpected tax charges – please feel free to contact us to get more information if this is an area you would like to explore.

Is working capital finance a good idea?

Working capital finance solutions can be used to help improve business cash flow, which can be helpful when times are tough, and money is tight. There are a myriad of commercial finance and asset-based lending (ABL) products in the market, many of which can be complex and expensive. As products, terminology, and contractual interpretation vary from lender to lender, it can also be extremely confusing.

Some of the benefits of financing working capital are:

• Immediate cash flow boost with up to 90% of outstanding customer invoice value advanced within 24 hours.
• Flexible lending – funding can be increased in line with your growth.
• Confidentiality – lenders can offer a completely confidential service meaning that your customers are not aware you have a facility in place; and
• Structured ABL – providing funding for management buy-outs/management buy-ins.

The most common forms of finance are:

• Invoice Finance – quickly access a proportion of the value (up to 90%) of your sales invoices, by ‘selling’ your invoices to the lender in return for accessing cash at the point products and services are sold. Specific sector-based offerings are on the market as well as flexible packages, enabling you to arrange finance for selected invoices only.
• Structured ABL – can be used to generate a higher level of funding by unlocking the value tied up in the combined assets of the business, such as the debtor book, stock, plant and machinery, and property. Further forms of funding can be structured in addition to this, e.g., top-up loans to drive growth; and
• Trade Finance – finances the supply chain enabling goods to be purchased from overseas when those suppliers will not give credit.

Usually, to access this type of funding, you will need to ensure your management accounts, debtors and creditors ledgers are up to date, and you may need to provide cash flow projections to potential lenders.

If this is of specific interest, please contact us as we can introduce you to working capital finance experts who have many years of experience and success in advising businesses across a wide range of sectors and provide straightforward explanations on how these products can work for your business.

Get great advice on what you really need from YOUR Wolverhampton accountants 

We want to see our clients not just survive but thrive too! 

With all that in mind, if any of the above information has piqued your interest, just call 01902 783172 to speak with one of the friendly tax team here at Copia Wealth & Tax Limited, Wolverhampton in complete confidence, or alternatively, please contact us by using our online enquiry form HERE.

We very much look forward to hearing from you.