By Rachel Mainwaring, Operations Director at Creditsafe
There’s no denying in the last 12 months the UK has been dealt its fair share of change.As a result, we now find ourselves in a period of uncertainty, where the future prospects of businesses are unclear.
Undoubtedly, change brings new challenges. According to the first post-election poll ran by the Institute of Directorson 9th-11th June 2017, business confidence has plummeted. The poll revealed 92% of company directors were concerned about political uncertainty, whilst 57% were quite or very pessimistic about the UK economy over the next 12 months.
Adding to the air of uncertainty is the looming implementation of the General Data Protection Regulation(GDPR)in May 2018. The regulation, which will replace the Data Protection Act of 1998, is set to implement stricter rules on how businesses manage, process, store and share personal customer data. Businesses are having to invest huge amounts of time and money to make sure they meet regulatory deadlines.
With so much change occurring and more likely to come, it’s easy for businesses, regardless of their size, to become distracted from the things that really matter. After all, there’s a lot for them to be thinking about. If a business is not on the ball, there could be consequences,primarily late payments and rising business debt.However, whether a business is the debtor or creditor, there are a number of ways to keep on top of both of these problems during uncertain times.
Tackling late payments
Figures from our 2016 End of Year Review reveal that during 2016, more invoices were paid late than on time. For this reason, there’s a real danger that late payments, already considered the ‘norm’ in business practice, will worsen during challenging times. It’s important that despite mounting pressures, businesses confront debts during times of insecurity, in order to avoid financial crisis.As the creditor, there are many ways a business can try to avoid late payments; from credit checking, researching a company before entering into business and making sure set payments terms and processes are securely in place.
Communicating with creditors
For the debtor, whilst it might sound simple, if late payments are a problem, don’t let them escalate or ignore them. The legal route is extremely expensive for both parties involved so it’s important that every company works hard to build close relationships with those they’re in business with. For this reason, it’s in many creditors best interest to work things out organically and many will appreciate the honesty. With a strong working relationship in place as well as regular communication, if there’s a struggle to pay, or a business is feeling a little claustrophobic, there should be room for a little flexibility.
Rework your budget
Upcoming regulations such as GDPR means there is a significant sum of money that companies need to invest in preparation, which has potential to increase business spend and increase feelings of insecurity. In essence, GDPR will require businesses to be clearer about the information they are requesting from customers and how they plan on using it. With confusing contracts and terms and conditions set to be scrapped, companies will need to be transparent at all stages of data collection, to ensure consumer consent is given unambiguously. GDPR will apply to both processors and controllers of customer data and will affect any business that is currently adhering to the UK Data Protection Act.
At a time when data breaches are occurring on a daily basis, businesses are already faced with the huge responsibility of keeping their customer’s personal information safe – or they risk the consequences of a significant fine. For example, TalkTalk,was issued a record £400,000 fine by the Information Commissioner’s Office because they failed to protect the personal data of 156,959 customers from a cyberattack. GDPR is actually increasing the accountability of businesses further. Stricter penalties are going to be introduced to businesses that breach the new legislation, with the maximum fine increasing from £500,000 to €20m or 4% of global turnover in the most serious of incidents. Such a fine could have a significant impact, and this is why there’s an investment sum. Businesses will need to make all the internal changes necessary to ensure processes adhere to the new regulation.
To make room for this investment and ease the climate of uncertainty, it’s important for a business to plan and revisit their budget,in order to rework finances. By doing so,it’s possible to adapt to changing circumstance in uncertain times, whilst maintaining a healthy cash flow
Organic customer growth to drive cashflow
Clearly, the easiest way to minimise and stay on top of business debt in uncertain times is by increasing cashflow-but it’s easier said than done. Cashflow is key to the growth of a company and a business that has debts to pay needs more of it. Customer engagement can be key in this area. By engaging with existing customers and offering discounts and incentives, a business can up-sell to boost customer retention and thus cashflow.
With business confidence low and late payments already rife, it’s easy for debts to build. Paying on time and minimising existing debts should remain a priority for all compnies, regardless of the economy’s health. After all, cashflow is the lifeblood for any business.