How small businesses can navigate the 2024 economic landscape
As we look back at this year and the challenges presented by the current UK economic climate, small businesses have showcased remarkable resilience. They have had to navigate inflation, increasing energy prices, interest rates and falling demand as well as the overall cost of doing business. There will have certainly been many lessons learned and the time is now for business owners to take a step back, and proactively prepare for 2024.
Looking ahead, with the evolving market and upcoming economic changes it is vital that business owners are well-informed and equipped with the relevant knowledge and tools to help navigate the shifting landscape and be as prepared as possible for next year. And despite living through unprecedented times, there are some fundamental steps that small businesses can take to achieve that.
1. Understanding your business credit score
A business credit score is the measure of a business’s creditworthiness and is made up from a number of factors to determine the financial position of a business and its level of financial risk.
Understanding and improving your business credit score is key to navigating the challenges of starting and establishing a new business.
A strong business credit score can also be used in two ways. As well as being a tool to help you secure the best investment opportunities for your small business, it’s also essential for managing cash flow. It enables small businesses to access better financing opportunities that drive expansion and innovation, enhancing the overall credibility of the business and stronger relationships with suppliers and lenders.
To access credit, small businesses should begin by establishing a separate business bank account to enhance credibility. They should also regularly check credit reports for accuracy and ensure prompt payments, consequently building a positive credit history.
2. Maintaining strong cashflow
Strong cashflow will continue to be key in creating cost advantage, helping small businesses capitalise on potential opportunities, and keeping their business afloat. It’s key that business owners have the right safeguards in place and are keeping on top of their finances to protect cashflow.
Ensuring payments are made on time will demonstrate to prospective lenders that their company is a responsible organisation to conduct business with. While late or non-payments could damage company finances, having the adverse effect on an organisation’s financial health.
It’s imperative for these small businesses to know how their business tracks at all times, understanding both their income and expenditure, whilst also maximising their working capital.
3. Effective credit management
It’s crucial that all small businesses understand the true importance of establishing and managing their business credit. Experian research shows us that, small businesses are largely managing their existing credit agreements. About 38% intend to stick with their current agreements but may explore amendments to improve affordability. Moreover, 25% express confidence in meeting their payment obligations without renegotiating terms, while 19% plan to amend payment schedules to repay loans ahead of schedule.
Interestingly, new Experian research shows that small businesses in the UK are using credit carefully to improve their performance. Analysis found that 84% of businesses are using credit to improve cashflow, or as a financial safety net, rather than to meet rising day-to-day expenses.
This is vital for funding future development projects or overall business growth.
4. Continued commitment to sustainability
In 2024, small businesses should look to improve their own impact on the environment whilst looking for green finance options to help fund their business. This will help play a positive role towards better sustainability.
Boosting growth with a more sustainable finance option will help small businesses to reach carbon neutral or positive state. It also helps to build greater engagement with both suppliers and consumers who are actively looking for better commitments from the businesses they work with.
Recent findings show that 72% of UK companies with 10 to 250 employees have been able to maintain investments in their sustainability initiatives. This indicates that, despite the ongoing challenge in economic conditions, their efforts towards a more sustainable future have not dampened.
Setting for success
Overall, small businesses in the UK are showing resilience and adaptability. As we head into 2024, it will be vital for businesses to stay up to date with the latest news. By getting a better understanding of the current climate, small businesses can make better, more informed decisions regarding their strategy and operations going forward.
The road ahead will remain challenging, so small businesses need to continue adapting. And this will include utilising innovative strategies to reduce costs, increase revenues, and manage credit effectively. These will be the foundation stones to continue building towards a successful future giving them the best chance of thriving and surviving in an increasingly changing business landscape.
This was posted in Bdaily's Members' News section by James McGarva .
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