3 practical ways to protect your business from the cost of living crisis in 2023
The cost of living crisis is continuing to unfold, as households across the world feel the effects on their monthly bills. As a business owner, you have two sets of finances to think about: your personal finances and your business finances.
If you’re wondering how you can protect your business from the impact of the cost of living crisis, here are three practical steps you can take to prepare for the year ahead.
1. Give your business a cash flow MOT
Cash flow is the lifeblood of any business, so you should make sure you monitor it regularly. Ordinarily, this might mean checking your finances once a month, but when times are tough a weekly review might be more beneficial.
In anticipation of a potentially difficult financial year ahead, there are a few additional things that might need doing.
Review your payment terms
One of the best ways to make sure your business always has a healthy cash flow is to be sure that your customers pay you for your products or services before you need to pay your suppliers.
To do so, keep payment terms for your customers as short as reasonably possible. This means you’ll avoid having to pay your own invoices before you’ve been paid yourself.
Reassess expenses and cut back on luxuries
Monthly or annual costs are an inevitable part of running a business, but these can add up quickly. For some quick cost savings, look through your current expenses to see where you could trim the fat, keeping more cash in your business.
Some examples of areas that could offer cost-saving opportunities are:
- Memberships or subscriptions that you don’t get value from
- Software that isn’t used regularly
- Expensive raw materials that could be switched for more affordable alternatives.
Increase prices to keep pace with inflation
If you aren’t increasing your prices with inflation, you’re going to be making a loss in real terms, so take some time to look over your pricing. When was the last time you raised your prices? Are they fair to you as a supplier and to your customers?
You should review your prices at least once a year, but especially during times of high inflation.
Build up your emergency cash reserves
Building an emergency cash reserve to see you through months of lower income can provide you with peace of mind. Having extra cash available means you will be able to cover your bills and salaries even if you didn’t make your expected revenue in a given month.
2. Check what grants are available to you
There is a lot of financial help available to small businesses in a range of sectors in the form of grant funding or loans. Grants are usually designed to support an important social cause, whether that’s helping to boost job creation, improve sustainability, or increasing diversity in a particular sector.
Grant funding is competitive, and you will almost certainly need to meet a list of eligibility criteria to be able to apply. But if you take your time to find the funding that will be of most benefit to you, and tailor your application to ensure you tick all of the boxes, it could be a very helpful boost to your business growth.
To find out if you could be eligible for grant funding, visit the gov.uk website for more information.
3. Ensure you have taken out the right kinds of protection
None of us has a crystal ball, so no matter how well you prepare, sometimes something unexpected can crop up that puts an additional strain on your finances. Depending on your circumstances, the consequences of this could be significant.
That’s why, alongside keeping your cash flow in check and accessing grant funding where possible, taking out the right kinds of insurance is an essential part of protecting your business during and beyond the cost of living crisis.
Here are two kinds of insurance that could be important for your business.
Business interruption insurance
Business interruption insurance safeguards you against any financial fallout from events that mean your business cannot function properly for a period of time. Examples could be fire damage to your offices, or the theft of key pieces of equipment.
Cyber insurance
Cyberattacks can have wide-ranging effects on your business, not the least of which being substantial financial difficulties. A survey by Ipsos found that the average cost of a cyberattack on a business in the UK between August 2021 and August 2022 was £4,200. The figure rises to £19,400 for medium or large businesses.
You could be at an increased risk of this if your business relies on a supply chain, since this is often the place where cyber criminals find the weak spot that can be targeted. To protect yourself, cyber insurance is a must. If your business were to fall victim to a cyberattack, you could be able to claim for any financial losses you suffer as a result.
Get in touch
If you’d like to make sure you have the correct cover in place to protect your business from the effects of the cost of living crisis, we can help. Email creative@eggarforrester.com or use our contact form to request a callback from our team.
