Your finances might be shakier than you think...Here's why

10th June 2021

This significant date that probably passed you by...

On June 1, landlords were finally allowed to evict tenants again. This right was suspended for many months, during Coronavirus.

The courts are about to be inundated with landlords rushing to begin proceedings.

It will take a few months to filter through, but before the end of the year we’ll see a large rise in evictions. There will likely be a strong knock-on effect on social services as families lose their homes...

...And a potentially enormous impact on the economy as the rental and housing market is de-stabilised. Landlords may find it difficult to replace their tenants, leading to financial difficulties of their own, and we may even see an impact on house prices across-the-board.

It’s hard to grasp as the Corona situation is improving. But as the government withdraws all the measures intended to keep things stable during the pandemic, there’s economic danger ahead. And that includes the commercial arena.

Right now, thousands of “zombie” companies that should have been wiped out by the Corona crisis are being kept afloat by “Bounce Back” loans.

But repayments have to start after 12 months - and for many companies who took out those loans right at the start of the pandemic, that date is quite close.

While the terms of those loans were incredibly generous, they cannot be avoided forever.

Companies that took out much larger CBILS loans may have to start repayments even sooner.

Many will manage just fine. They may have taken those loans out as a precaution, or managed to pivot during the pandemic.

But others are still struggling, and repaying those loans will bring them to breaking point. It’s highly likely we’ll see a big rise in insolvencies before the year is out.

Now, you may be wondering: “What does this have to do with me? My company did extremely well during Coronavirus. Even if we took out a loan, we can easily repay it. Our company is not in any danger.”

That’s where you might be wrong.

You see, it’s entirely possible that some of your suppliers have taken out Coronavirus loans, and will soon be facing repayment.

The same applies to your B2B customers.

And you may very well find that the repayments are a burden to them - forcing them to rethink their spending, cut corners or even (worst case scenario) to shut down altogether.

So even if you’re safe, your supply chain and buyers may not be. And that makes you vulnerable.

After all, what would happen if 2-3 of your largest customers suddenly stopped buying from you?

Or if one of your most important suppliers was suddenly thrown into chaos?

There is no way that wouldn’t affect your business. The knock-on effect of their financial problems could possibly even knock you out.

So don’t be complacent.

No matter how strong you feel right now, be aware that there may be an impending financial storm - and take precautions.

Don’t give credit. You have no idea whether people will be in position to repay you in a few months’ time.

Keep watching your suppliers and clients for any signs of financial trouble. You don’t want to be caught with bad debt!

And make a basic plan now for what you would do if your most important suppliers disappeared.

Thinking through these scenarios and making sure you’re prepared isn’t dramatic - it’s just common sense. If there’s one thing we’ve learned during 2020/2021, it’s that seemingly inconceivable things really do happen.

It’s also an integral part of good financial management, which is why we map out these scenarios with our clients the whole time.

Large corporates always plan for the worst - they are fastidious about risk management. If you want to run your company professionally, you need to be, too.

So if your accountants are simply telling you what happened to your accounts last year, instead of helping you plan forward, it’s time to upgrade your financial management.

Just hit ‘reply’ to this email or call us today on 01279 647 447 to find out how our Outsourced Finance Department can help you maximize your profit and grow much faster.

And we’ll help you mitigate the biggest financial risks you face, too.

Warmly,

Garry

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