NEL Fund Managers has been established in the North East for 33 years and makes investments from £10,000 to half a million pounds in local businesses that have plans for growth. CEO, Jonathan Luke, outlines some of the actions that businesses can take to help mitigate the impact of the current cost of living crisis.

For many businesses, the effects of Brexit, COVID, the war in Ukraine and the energy crisis have created a perfect storm, with rising costs of borrowing, supply chain issues and people and skills shortages.

It’s making it more difficult for many businesses to plan and continue with their growth plans. But there are things that businesses can do to put themselves in as strong a position as possible.

Look at your lines of supply

One of the major issues we’re hearing from many businesses at the moment is that supply lines are disrupted and, in some cases, due to the war in Ukraine, have disappeared altogether.

This is why it’s so important to review your suppliers and mitigate any future risk by checking you’re not over-reliant on any one supplier. Could you look at broadening out your supplier base? Or identifying alternatives in case of any future issues?

Check your costs, margins and credit terms

If you’re dealing with goods and services where prices can fluctuate, regularly review your costs and pricing. Revisit your margins and make sure the work you’re delivering – and will be delivering in the future - is profitable.

Check what you’re paying out as well and benchmark prices against industry standards. Make sure you’re not overpaying and, if prices have risen, think about whether you need to pass this on to your end customers.

You should also regularly review your credit terms – can they be improved? Many businesses offer a discount for early payment, which obviously eats into profit margins but can help keep cash flowing.

Carry out a cash flow analysis

This is relatively simple but is something that lots of businesses don’t do regularly.

Have you looked at your cash flow and modelled scenarios and identified any potential pinch points? The better you are at identifying potential issues in advance, the better your chances of making adjustments and being able to plan your next stage of growth.

Review your skillsets – and call in the experts if necessary

Think about whether your team has the skills to carry out these financial checks internally or whether you need to call in an expert.

One of the reasons we find some small businesses aren’t carrying out these checks as a matter of course is that they don’t have the skills available in-house. If that’s the case, don’t just make do; think about working with a professional adviser. We’re able to signpost the businesses we work with to experts who can support them with this.

Check what financial support is available

The government’s Recovery Loan Scheme 3 (RLS 3) recently launched and is in place until 2024. It aims to help smaller businesses across the UK, with turnover of up to £45 million, access finance they may not have had access to commercially and it can be used to invest in your finance function or other parts of your business.

NEL Fund Managers is an RLS-accredited lender, so businesses can talk to us about how RLS3 could help them to upskill their team. It’s potentially a great opportunity, especially for businesses that might find it difficult to access funding from more traditional lenders.

Don’t wait for a crisis to happen, take action now

These actions are all good business practice at any time. I know it’s easier said than done, but try to have these checks in place as part of your regular ways of doing business.

It’s a different world now; we can’t keep doing things the same way. So I’d advise all businesses to revisit their plans and make sure that what they’re doing is working in the current environment.

And remember, it’s not all doom and gloom. There are still opportunities, we still have businesses coming to us with ideas, and it’s still possible for your business to grow.