There is little doubt that the current cost of living crisis has amplified financial struggles for businesses across all sectors, as Gov.UK reports reveal insolvency figures in September 2023 were 17% higher than last year.
In particular, there has been a 35% increase in insolvencies in the construction industry, a 29% increase for transportation and storage companies and a 20% increase in the manufacturing sector since the start of 2023.
As energy prices continue to rise, supply chain disruptions continue, inflation increases and laws and regulations change, we’ve put together some steps to help improve cash flow and seek advice to help reduce the possibility of insolvency.
Fail to prepare, prepare to fail
One of the most valuable steps to take if your business is on the brink of insolvency is to plan your next steps. Whilst it may seem easier said than done, when managing financial issues, it’s more important than ever not to rush into rash decisions or make choices based on ease.
Although you should already have a business plan in place when starting a business or beginning a new financial year, making a new plan as soon as these issues start appearing will help you in the long run.
Depending on your situation, your plan may span over a whole year, six months or even just a few weeks. When creating your plan, be realistic about your current situation and where you predict you will be in the near future. Ensure the targets you set are realistic and create a clear plan indicating how you will achieve them.
Make use of available support
Although financial difficulties in your business may negatively affect your mental health, be reassured that plenty of resources and schemes are available for support. If required, you can access free business debt advice online, and many charities are set up with professional advisers who can help you including Business Debtline, Money Advice Trust and Gov.UK. You can also seek professional guidance from your accountant, an IP or a restructuring firm, but ensure initial calls are free and no obligation.
With the after-effects of the pandemic and the current cost of living crisis, schemes have been created to support struggling small businesses. While signing up and joining these schemes immediately may be tempting, you should consider your options and ensure that these schemes benefit your
company and will not cause further issues down the road when they must be repaid.
However, there are some free government support schemes in place to support businesses, such as Business Rates Relief, can help reduce the amount of tax charged on certain commercial properties and Business Asset Disposal Relief allows owners to pay a reduced tax rate when disposing of certain assets. Your accountant can help you determine if you are eligible, or you can check the official government guidance for more information.
Chase outstanding debts
Your business’s finances can appear much worse than they are, especially if you are not considering any outstanding debts or payments you are owed.
This can vary depending on your business type and operations. For example, if your business is in the construction or manufacturing sector, your income may be spread out due to larger ongoing projects. This can make it harder to understand your current financial situation clearly.
Reviewing and including all outstanding payments may help to reduce the debt you’re facing and could protect your business from insolvency altogether.
Reduce Operational Costs
Insolvency can be caused by a lack of money coming into your business, so looking for ways to reduce the expenses going out could be beneficial for improving business resilience.
Reducing operational costs is especially important for construction and manufacturing businesses to help combat industrial energy price increases. Recent statistics from Gov.UK reveals a 45% increase in electricity and a 32% increase in total fuel prices for the industrial sector in 2023. (Comparing April-June 2022 to the same period in 2023).
Likewise, look into any fixed costs your company has, such as outsourcing services that could be done in-house or paying for rental equipment and think about purchasing low-cost second-hand machinery and equipment instead.
With the rise of working from home, office space can also be an area for considerable savings. Relocating or downsizing your business premises could be a great solution to save on expenditure to reinvest in processes and equipment to help your business run more efficiently.
Moreover, if necessary, internal costs can also be limited, such as staff perks or outsourcing costly business processes or services.
Sell surplus assets
Selling unused machinery and equipment not only aligns with the principles of the circular economy, fostering resource efficiency, and environmental management, but it is a quick and easy way to raise business funds fast.
Outdated or unused commercial equipment and machinery can be sold via our online marketplace raising business funds you urgently need or to make space in order to downsize and reduce further costs.
How can BPI Asset Disposal help you?
If you require additional sources of finance and have equipment, tools or machinery you’re looking to sell, our streamlined asset disposal, can save you valuable time and money.
BPI can help with the quick sale of a wide range of business assets, including construction, plant and machinery, woodworking equipment, site equipment and cars and commercial vehicles.
Whether you are planning to relocate your business, renew your fleet at a lower cost, or you are looking to close your business, our specialists can provide you with tailored solutions and guide you with advice throughout your journey.
Contact our friendly professionals today to find out how we can help you!
Alternatively, if you’re looking to reduce your spending on goods, check out our current available auctions here.
