With the pound falling to a record low, there is little doubt that another UK recession is just around the corner. Exports have declined, consumer spending has decreased due to living costs, and the energy crisis continues to hit homes and businesses throughout the country.
Small businesses are feeling immense pressure, especially those that have depleted their resources. However, it is not too late to take action and start protecting your business from the turmoil of these upcoming months. The key is to cut costs in the most unexpected places and ensure you get paid for your sales.
Six Tips to Protect Your Small Business During a Recession
Prevent Late Invoices
Preventing late invoices is easier said than done. However, there are easy steps to reduce late payments.
Payment terms – Drawing up explicit payment terms is essential for any business. Before embarking on a project, ensure that your clients know what is expected of them. They need to know:
- When payment is expected
- How it is expected
- Who will be responsible for any payment related fees (should platforms like PayPal be chosen)
- The consequences of late payments – you have every right to add an incremental penalty for late payments.
Payment automation – Automating your payments through a direct payment platform, such as SimplyPayMe, can minimise late payments while streamlining your payment processes and help maintain a good relationship with your clients.
Customer relationships – Building good relationships with your customers is one of the easiest ways to ensure that your invoice is paid. Customers who value and respect you and your work are far less likely to miss a payment.
Cut unnecessary costs – When running a business, costs creep up in unexpected places. When times are good, it’s often easy to overlook them; but you need to take action when sales are down, and overheads are up.
Assess your expenses – Whether it’s re-evaluating your suppliers, looking into premium renewals, or investigating tax relief, most businesses have several areas where they can cut unnecessary costs. Moreover, by reducing your outgoings, you can improve your essential cash flow.
Avoid chargebacks – Bank chargebacks – where customers go directly to their bank or financial institution to get their money back rather than following the established refund process – are one of the most frustrating parts of a business. With a chargeback, you are losing the money you are due and the product or service you have provided, making it a difficult area to redress. To avoid chargebacks, you should start with:
- A strong refund policy. The policy instils confidence in your customers while letting them know exactly what is and isn’t acceptable under your terms of service.
- A solid anti-fraud policy. Train your staff to look out for 1. differences in billing and shipping addresses, 2. the use of P.O. boxes, and 3. PIN errors. If you are operating an online business, it pays to have an email address confirmation process and a flag for using incorrect security codes.
Pay Attention To Your Customers
Much thought should go into your money when you don’t have much to spend. Listening to your customers, finding out what they want and expect to tailor your services to their needs, engenders loyalty – and customer loyalty will keep your cash flow moving. When a small business wants to survive a recession, it is about prevention rather than cure.
Implementing these simple steps and changing how you take and manage payments are significant in avoiding loss and keeping your company alive.
Gary Prince is Chief Strategy Officer at SimplyPayMe, an award-winning global payments company whose mobile-based payment and business management solution is specifically designed and engineered to meet the growing demands of the underserved SME community.