Three ways to make your business’ money work harder in 2016
If 2016 is the year to grow your business you’ll need ways to make your money work harder. Here are three ways to get smarter
‘What does 2016 hold for my business?’ is the question almost every business owner has been grappling with since the turn of the year.
While it is always good to think positively, there are signs the state of the UK economy in 2016 may require businesses to be agile in their thinking.
In December, business group the British Chamber of Commerce (BCC) downgraded its GDP growth forecast and stated the UK economy remained too reliant on consumer spending.
“Anyone who says that the job is nearly done needs to look again at the trade deficit, current account position and long-term business investment – and realise there’s still a long way to go,” warned John Longworth, director general of the British Chambers of Commerce.
In addition, November’s Black Friday sales may have temporarily lifted retail figures, but year-on-year the British Retail Consortium (BRC) and accountants KPMG found retail sales were 0.4% lower for the month.
And although companies that import goods will have been delighted to see shipping costs falling dramatically, even in the lead-up to Christmas – which is traditionally a busy time for the industry – the fall in costs suggest companies are not ordering as much stock today since they fear investing in what will only become surplus inventory.
You might think this all means 2016 is a time for pessimism. But it’s not. It’s time to make your company’s money work harder, certainly as we get closer to seeing how the first half of the year pans out. After all, the BCC is still expecting UK business investment to grow in 2016.
So, what can your business do to spring clean now and make your cash work harder?
1. Review costs with suppliers
It may seem like a chore but reviewing spend with suppliers and researching alternative providers could deliver significant savings for your business.
Despite being a seemingly obvious task, many busy business owners simply don’t find the time to understand how much the business is spending and don’t review the performance of each supplier during the prior 12 months.
Having a formalised system of evaluation for suppliers allows constant management and draws attention to issues during the year which in turn enables valuable and constructive reviews and could provide leverage for renegotiating agreements.
A standard process for supplier management should include the following:
Establishing review meetings
- These can be monthly, bi-monthly or quarterly and should be mutually agreed by both parties
Meeting review agendas may want to include the following:
- Updates on your businesses activity
- Review of action points or issues to be raised in the meeting
- Raising of specific issues for both parties
- Review of the performance of your agreement
- Action points and confirmation of the date for the next meeting
- Completion and circulation of minutes and action points
2. Get a website and build your digital presence
Many consumers, in fact a huge 55% say they would use more local businesses if they had a website. Conversely 44% of businesses in the UK don’t have a website. If yours does, you might want to skip this point or else consider whether your website is working as well as it could be for you.
While setting up a website and finding an agency to help manage it is an outlay for businesses in the short term, the longer term benefits could swiftly generate enough income to pay back the initial outlay and more.
Across England, the government set aside £2m for 22 of the 39 local enterprise partnerships (LEPs) to help businesses improve their digital presence. The prize is large with £193bn being spent online in the UK in 2013, according to figures released in 2015 by the Office for National Statistics.
Simon Devonshire, the government entrepreneur-in-residence, said: “Government research suggests that nearly two million UK businesses are not online, and of those that do have an online presence, over two-thirds are not transactional.
“Those businesses that embrace the digital opportunity are improving their opportunity to reduce costs; to scale-up; and possibly even export – giving a further boost to the UK economy.”
So if you haven’t got a website what do you need to think about? As a website user yourself you will already be aware of your likes and dislikes when using other companies’ websites. Gather examples of the websites you like and why, and also look at what other companies in your sector offer online.
Also have a think about your domain name (your website’s address), what you want your site to look like, and what type of site it is going to be? Do you want people to be able to order items, request quotes etc? Think about the hosting of the site too. When speaking with a web designer raise the following points:
- Functionality and navigation of the site: will having lots of functionality be price prohibitive? Will it take longer to build?
- Design of the site: what do you want it to look and feel like?
- Content management system: which platform might you use and how will it be hosted?
- Future proofing and continual development of the site: the layout and content, including text, photos, videos or other media. Also, check if you are able to make amends on the site through a CMS (content management system) if not it could cost you every time you want to change wording, images etc.
- Testing of the site: make sure everything works
- Site maintenance: a plan to ensure the site is maintained and managed constantly
Other things to think about are:
- Devise a search engine optimisation (SEO) plan: how can you maximise natural searches to your site through SEO
- Analytics and reporting tools: analysing user journeys and understanding how they are interacting with your site; what are visitors doing once they get there?
- Web hosting and email services set-up
- Design and build of any e-newsletters
- Consider how you can use social media to boost your presence online
3. Make cash reserves work for you
The surplus cash in your business could work harder for you if you keep it in a specialist business savings account, providing a better interest rate compared to a current account.
Aldermore, a bank which focuses on supporting small and medium-sized businesses, says the consensus is that companies should maintain a contingency fund of three to six months of operating expenses.
Research by the bank also showed that almost a quarter (24%) of small and medium-sized businesses didn’t know what interest rate their business was receiving on their surplus funds and a further quarter (23%) admitted their business receives 0% interest.
Despite these low rates of interest, research also showed that business owners regularly review their surplus funds. Six out of 10 (62%) do so at least once a year which indicates that businesses are thinking about how their cash could be working harder for them.
One of the main issues concerning business owners when reviewing savings accounts is the misconception that their current account will also have to change and difficulties may arise transferring funds from savings accounts to current accounts if cash is required quickly.
Finding the time to look at the business savings accounts available could provide additional benefits for the company and the opportunity to use the interest to grow the business.
There are a number of different ways to search for the best rates, including comparison websites which now compare business savings accounts allowing you to see all options available for you and your cash.
Taking care of a business’s finances is vital to its success. Simply undertaking a few small changes could result in significant cash savings.
Simon McGuinness is head of marketing – savings, at small and mid-sized business-focused bank Aldermore. www.aldermore.co.uk