With UK recession on the horizon, business owners scrabble to save money
With a 1.4% fall in retail sales in March 2022, and the pound at its lowest against the dollar since 2020, an economic recession could well be on the horizon. Indeed, since the Pandemic, a downturn in the economy has been much predicted by the media and the financial sector alike.
Of course, this is bad news for many businesses that will feel the pinch, especially SMEs as they often have less capital, to begin with. This is leading many such businesses to take a proactive approach to saving money and managing their finances in preparation for the economic downturn.
The good news is that many actions can help SMEs save money, and help them stay afloat, even during a recession. Read on to find out what they are.
Reconsider your payment terms
Payment terms can make a significant difference to a business during times of recession because they ensure sufficient cash flow. With that in mind, be sure to carefully consider any incoming and outgoing payment terms you agree to.
For example, for incoming payments, making sure that you aren’t waiting a long time until a customer’s money hits your account is the goal. That means keeping invoice payment terms to a month where possible.
However, for outdoing payments, the longer you have to raise the money to pay your debtors the better. That means wherever possible try for 60 or 90 days when you work with a new provider.
Of course, these are just general rules and there may be cases where it makes financial sense to break them. For instance, if you have a very big client that orders a great deal from you each month, extending their payment terms could help to keep that relationship sweet.
Compare to save
One of the most straightforward ways to save money during a recession is to get more than one quote for every service or supply that you need. Remember that other businesses will be impacted by the recession too and so will be keen to have your business. That means they are likely to offer better value quotes and even be open to negotiation in some cases.
Only pay for the services that you use
Another way to keep your business costs down is to make sure that you only pay for services that you are using. First of all, that means checking to see if you have any freelancers on retainer. If so, then make sure that you are using up their full offer of services each month, or reconsider whether to keep the retainer or not.
Secondly, subscriptions especially SaaS and productivity software can really add up if you aren’t using them to their full potential. With that in mind, do a quick audit of how useful any service you subscribe for actually is. Be sure to have ROI in mind while you do this, and if they aren’t providing a good return on your investment, get rid!
Lastly, consider whether your business truly needs a full physical office set up? After all, there are so many provisions for remote and home working these days, which means you can offer just the same service to your customers, without the massive overheads that IRL premises require. It’s even possible to rent meeting rooms, and hot-desking spaces if you and your team do need to get together from time to time.
Cut your IT bill
Even in a recession, your business will still require the correct software, hardware and IT Services to operate. However, there are ways to keep your IT costs low. The first of these is to lease hardware instead of buying it. This is helpful because it means you can upgrade without additional cost, and you will know precisely what your hardware costs are each month, making them easier to track and budget for.
Secondly, be sure to choose a repair company that offers IT Services with a fast turnaround. Otherwise, you could end up waiting and losing money while you do so. A provider that only charges when they have made a repair is a good idea too, as this will help you keep costs low, even in a recession.
It’s a no-brainer, but swapping to a paperless operation will save your business a significant amount of money in the medium and long term. This is because not only will you not have to buy paper, but you won’t have to pay out for ink, printers, photocopiers, scanners, or space for physical filling either.
Of course, when moving your entire system online, you will need to make sure that your IT security is up to the job. Otherwise, you could be putting your business at risk.
Rethink your relationship with your employees
Taking the best care of your employees can be particularly tricky in a recession. Indeed, if you do not take action now you could be forced to make redundancies later on.
To that end, prioritising benefits over wage increases can be helpful in lean times. This means instead of offering a pay rise your business provides additional things of value to your employees to ensure they feel appreciated and stay motivated.
In particular, services that you can buy on a business bulk discount, and then offer to your employees for free can help you bridge the gap between frugality and retention. A great example of this is recipe boxes, as these can add significant value to your employees’ lives as they will save them a great deal of time and money.
Also concerning employees, opting for freelance workers rather than taking on full-time people on the payroll can be an effective way of keeping costs low. Additionally, these freelancers will be experts in their field, so you can be sure that the tasks you assign them will be completed to a high standard, and in line with the latest trends in their field, something that is also likely to greatly benefit your business and help you bring in enough revenue to survive a recession.