Recession-proofing your business | Jackson Stephen

Recession-proofing your business

5 mins

Can your business adapt to the changes in the economy? Post-Covid-19 there are new chal...

By Lucy Williams

Tax Partner

Can your business adapt to the changes in the economy? 

Post-Covid-19 there are new challenges causing medium to long-term uncertainties for the business community, such as rising inflation and interest rates, the cost-of-living crisis, and the Russia/Ukraine war.

Now is the time to plan!  As a business ourselves, we are doing exactly that.

With over 100 years of advising clients through uncertain times and with our own business to consider, we are in the right place to support you.  Ahead is the unknown.  No problem, all you need is the right advice. 

We have summarised below some of the key areas to consider as part of your plan:

1. Working Capital Reviews – Make sure you know what you need... 

  • One factor that will have a substantial impact upon a business's survival is having enough cash (or access to cash), to continue day-to-day operations, i.e. working capital.
  • How this is calculated varies from business to business. We have an experienced team who can help you understand the working capital needs of your business and how that may be impacted by changes to the economy. 

2. Cash Flow Forecasting – Make sure you understand what you have… 

  • Think of cash flow forecasting as an ‘’early warning system’’, as it will help you identify potential shortfalls in cash in advance, therefore giving you time to plan. 
  • We have a dedicated team on hand to prepare and monitor cash flow forecasts, as well as support with the use of digital tools to give you timely guidance and support with your cash flow needs. 

3. Cash Injections – Make sure you get what you need….

  • Get the cash you need by utilising the support packages offered by the government or raising external borrowings. 
  • Review existing lending facilities.
  • We have a wide range of contacts in both funding and financing, and we can therefore help you raise that vital cash.

4. Reduce/delay cash output – Make sure you do not spend more than you need to…

  • We are not suggesting businesses should make cutbacks, as costs increase, it is inevitable that businesses will have to look to protect cash as much as possible.
  • Tax is often a big overhead for businesses and business owners.  Make sure you utilise tax reliefs that are available:
  • Research & Development (R & D) Tax Relief – Can substantially reduce a company’s tax bill or if a company is loss-making, it is possible to surrender losses to receive a tax credit repayment from HMRC (even if no tax is paid).
  • Capital Allowances – Can bring forward tax relief for certain expenditure, i.e. fixtures and fittings, etc.
  • Take the cash you need from the business tax efficiently to reduce the net cash cost to the company (or increase your take-home pay):
    • Split income between family members to utilise personal tax allowances and dividend allowances.
    • Consider taking loans to delay when tax will be due.  Note that there will be income tax charges based on a deemed interest and the loans need to be repaid within 9 months of the year-end to avoid tax charges in the company.
    • Consider succession planning options that will allow potential cash extraction at Capital Gains Tax rates of 10%/20%.
  • Talk to your suppliers – Ask for extended credit terms (of course they may be experiencing similar cash flow issues, but as they say if you do not ask you do not get)!
  • Talk to your customers – Ask for early payments and ensure credit control is prepared to chase payments.

5. Protect what you have – Make sure your assets/cash are in the right place…

  • No one wants to face the possibility of their business failing, and the above measures are designed to help avoid that eventuality. However, we would urge businesses to consider protecting their assets now. 
  • Restructuring can be implemented to allow cash and assets to be protected from trade risk in the event that the business fails to survive. 
  • You will then be in a much better position to rebuild and start again. 

6. Digital tools……. There are some great digital cash management tools available to help…

  • It is more important than ever to have access to robust, real-time financial information and there are a range of digital tools that can help with:
    • Getting paid quicker
    • Planning cash flow
    • Reviewing scenarios, such as reductions in income
    • Reducing overheads
    • Identifying sources of funding to fulfill any cash shortfalls

Our team are here to support you at every step of your business journey, and we see it as our job to help relieve the anxieties our clients are facing.

We can help with all the above, and also draw from our experiences of how the businesses we work or partner with are tackling the current economic position and what measures they are taking.

Don't delay - contact us today!