Ask the Expert: Facing difficult times
Graham Bushby, partner at Baker Tilly, advises business owners on how to take control when faced with difficult times.
All answers are for general guidance only. Each case must be handled on the individual facts.
Q: How can I take control of my business when faced with difficult times?
In tough trading conditions, rooting out areas of underperformance is essential to all types and sizes of business across all sectors.
From our experience, key underlying infrastructure and business processes to examine include procurement/purchase to pay, sales orders to cash, and, where relevant, stock management. These have been key considerations for a while, however many businesses are still not as in control of them as they could be.
Finance and IT are other key back-office functions that all businesses need to constantly assess. Are they are delivering real value-for-money to the organisation?
Many businesses continue with legacy IT infrastructures which are no longer fit for purpose. Improved systems and processes often lead to greater efficiencies which can lower a business’s cost base hence increase profitability. But often the greatest benefit derives from the enhanced management information that improved systems can provide, enabling management decisions to be more informed and enlightened.
Whilst IT is a controllable investment, there is a balance to be struck between what is the right time to make such an investment and the benefits derived from undertaking it.
Adequate financial forecasting is also vitally important. Much management information produced by IT systems is historically focussed rather than forward looking.
It is about being aware of trends in your finances but also about communication, both internal to the business and external with key stakeholders including suppliers, banks, investors, shareholders and employees. However, that is only possible if you have robust forecasts that tell what you can afford to pay and when you can afford it. Robust forecasts will also tell you how much financial flexibility you have to help escape from living hand-to-mouth.
Reliable management information and the ability to produce accurate, timely forecasts are also key to dealing with the company’s bankers. They provide both good and bad book relationship bankers with an in-depth insight into the business as it is operating today and going forward.
In this tough economic climate, management can’t always influence or control what is happening in the external market but they most certainly can focus on getting their own house in order.
Graham Bushby
Partner
Baker Tilly
0121 214 3100/01908 687800
graham.bushby@bakertilly.co.uk
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