Winter 2008 – Current Issues

Welcome to our Autumn 2008 newsletter, this is our first newsletter from our new premises, by now you should have been made aware of the change, so hopefully this is not the first you have heard of this news. Due to the unprecedented levels of coverage involving the "Credit Crunch" and the "Impending Recession" this quarter’s newsletter highlights some ideas on straightforward ways to help survive these difficult times.

The Credit Crunch

With the continuing talk of a global downturn compounded by the fact that the ability to acquire finance is becoming increasingly difficult, businesses are starting to feel the pinch. Unemployment is anticipated to rise and the press are speaking of nothing other than our impending financial doom, now more than ever it is crucial that businesses plan for their future.

Succeeding in a downturn

Companies that generally do well in a downturn will find success lies in doing a small number of important things well. A business needs a strong and clear leadership to focus an organisation on its future goals and avoid confusion.

Good working relationships with customers are also integral to success. By listening to customers and acting on their advice your business delivers the results your customers demand. By exceeding the expectations of your customers, you should not only help maintain your level of trading, but give your business a chance of developing further.

Know Your Cashflow

Planning for the future will help to avoid disruptions and help keep cash flowing in your business. An accurate monthly cashflow forecast will allow you to get a clear idea of how your business is doing and give a good indication of how it is likely to perform in the future. By managing and monitoring your cashflow you will be able to spot potential problems before they occur, enabling you to be proactive, rather than reactive. With financers becoming more and more reluctant to lend money to businesses the necessity for cashflow forecasts is more important than ever when trying to arrange additional funding, or in fact keep the level of borrowings already in place. Forecasts will help focus your attention on cash and keep tight control of your cashflow. Credit control is crucial in these times of uncertainty; remember if your cash is tight chances are your customers’ cashflow is tight too.

Don't Put All Your Investment Eggs In One Basket

Variety and diversification is important for a solid investment strategy in times of instability. Make sure your investments give you a wide variety of different asset classes to reduce your exposure. The idea behind this strategy is that should one particular part of your investment portfolio suffer from the volatility within the market, you would have other investment that will counter the effects. Cautious investors could hold a combination of bonds, equities, property and cash to spread the risk of their portfolio.

Reduce Spending

The cost of living has increased greatly over the twelve months and things are likely to get worse before they get better. As cash is your businesses most risk-free asset, ensure you spend it wisely. Postpone large, non-essential purchases and reduce your outgoings wherever you feel you can. The easiest way to save money is to make sure you get the best possible deal.

Get Your Liabilities Under Control And Competitive

The United Kingdom is fast becoming a nation of debtors, this coupled with the global downturn, is bad news. Debt can be crippling in uncertain economic times and can seriously threaten a person’s livelihood and even their home.

Firstly try to do everything you can to start paying your debts off, which can be easier said than done. Credit Card balances are one of the most expensive ways of raising finance. Every month that goes by is costing more and more money. Think twice before using your credit card on day-to-day spending. If you don't clear your balance in full every month, try to switch to a 0% rate credit card and make a concerted effort to clear your balance, before the interest-free period ends.

Make sure you're on a competitive mortgage or loan deal. Reviewing your borrowings constantly is crucial in the current climate; ensure you are on a competitive rate. Mortgage lenders have been pulling cheap deals and cutting the maximum percentage of a property's value they are prepared to lend. This has lead to more and more refusals of mortgage applications, as they perceive greater risk among borrowers. Speak to your financers to see whether you are on the best possible deal to meet your businesses requirements and see whether or not better rates are available to you within the market place.

If You Are A Saver Use The Guarantees Available

The one clear winner from the credit crunch to date is savers. As banks want to get as much money as possible in their accounts, interest rates on savings accounts are improving. Unfortunately as Northern Rock and Bradford & Bingley has proven banks can go bust. If you are worried about the possibility of further bank collapses, do not invest more than £50,000 with any one bank or building society. This is the maximum amount of compensation for bank deposits each customer can claim back should your bank go bust. At present however you get one limit for each independently registered organisation with the FSA, even if it has several brands. For example you only get one limit for HBOS, which includes Halifax, Bank of Scotland, Intelligent Finance, Birmingham Midshires, Saga and the AA.

Professional Advisers Guidance

Leon Herman understands the difficulties being faced in today’s market. As a practice we have put together a new cost effective business review services to help you not only survive these difficult times, but come out of them as a stronger and wiser business. Whether its advice in how to implement a cash management system or how to develop your own business strategy we are here to help.

Attached with this newsletter is a "Tough Times Business Checklist" which we hope you will find useful as you look at ways to keep your business successful in this environment. If you would like help in completing this, please do not hesitate to contact your practice partner. Alternatively, if you would like help reducing your expenditure, for example in relation to reviewing your insurance or financial policies (i.e. pension, life insurance, public liability insurance, etc.) we can arrange for contact someone to contact you.

KEY DATES

Whilst all due care and attention has been taken in the preparation of this review, we cannot accept responsibility for loss occasioned by any person acting or refraining from action as a result of material contained therein. There is no substitute for professional advice specifically tailored to your personal circumstances. We can give that advice and welcome the opportunity of assisting you. If you would like to discuss any of the issues raised further, or for us to arrange a review of any of your procedures, please contact Alan Cohen or Darren Swann as follows:-

Tel: 0161 249 5040 Fax: 0161 448 9287
Email - alanc@leonherman.co.uk or darrens@leonherman.co.uk