How to manage your business finances in a low growth economy

This is a difficult time to manage your business finances. The UK is in a period of low growth and, for many firms, costs are rising and income is static, with sectors such as construction and recruitment finding it tougher than others.

Growing your business is certainly hard work at the moment, but not impossible.

Economists are coining the term ‘technical recession’, and I think that is spot on. It’s not a usual recession, where there is a significant decline in economic activity spread across the whole economy for a long period of time.

The downturn in a technical recession is shallower and doesn’t last as long, so it’s perfectly possible to manage your business finances effectively and make money.

Here are five principles that should help your business make the most of the opportunities that do exist.

First, you need to be willing to change as you manage your business finances so you can adapt to external factors, such as pressures on your customers’ budgets.

When times are tough, businesses will struggle if they keep finding reasons to carry on operating in the same old way. The trick is to work out what change is right for you.

Even if you offer the same, excellent service, you may need to adapt the way you deliver that service. Or you may need to find new customers in different sectors by adapting your products to meet their specific needs.

When businesses fail to manage their business finances, they often focus on the last straw that broke the camel’s back, such as a bad debt that is not paid or the loss of a big account. But usually, businesses build up to failure over a longer period of time.

That’s why you need to build firm foundations when you manage your business finances, so you can avoid the sudden pitfalls. And generally, that is about investing in the right people, systems and processes to get you through those difficult trading conditions.

With strong foundations, you will not be reacting to external factors off the top of your head.

Instead, you will have an accurate and reliable set of data to help you manage your business finances and make sound decisions: things like clearly defined objectives; accurate financial reporting processes; and a set of key performance indicators so you can see at a glance how your business is doing.

At Prime Accountants, we work with many profitable companies. We don’t manage their business for them, but they do value the financial stability and information that we provide.

In comparison, those businesses that see financial information as a cost rather than an investment when they manage their business finances often end up struggling.

The best businesses take a longer-term view, and you should do the same when you manage your business finances. If things go wrong, don’t beat yourself up about it – and don’t beat up your team either. Learn from what has happened so you can all move forward with positivity.

Similarly, if things go wrong, don’t throw out your whole strategy and start again. Consistency is often the key to success in business, even if you must adapt your strategy based on the adverse things you have experienced.