It’s time to run lean and batten down the hatches

April 9th, 2019

Can you buy an apple in Burslem? I ask the question because the Times newspaper reports that you can’t – well not in the town centre anyway. The Mother Town, it points out, has the highest proportion of boarded-up shops in the UK. And even if you could manage to find a greengrocer, you probably wouldn’t be able to get the cash to actually buy an apple as there is only one ATM left in the high street.

The Times used Burslem as the poster child for an article about Britain’s dying high streets but if the traders and local authorities had done a bit of horizon scanning, they could have seen this storm approaching and have been better prepared for it.  The disappearance of Wedgwood and Royal Doulton, the arrival of double yellow lines, the development of online shopping – all were flagged up in advance and all pointed to an inevitable reduction in footfall.

Am I being wise after the event? Well, actually, part of my job is to be wise before the event – and for businesses throughout the North Midlands I am issuing a storm warning. Followers of this blog will know that for more than a year now I have been concerned about local, regional, national and international data that indicates that an economic slowdown is on the way. The rise in local personal and corporate insolvencies is part of the picture but, as the Carillion experience has underlined, we live in a connected world.

Just a few months ago, the Financial Times began reporting that “A pall has descended over the global economy” and quoted Christine Lagarde, managing director of the IMF, as saying that “risks are beginning to materialise”. Since then the United States and China have stepped up their trade war, the EU is struggling with low growth and even Germany’s economy is tanking.

All I am saying is that – even without the uncertainty created by Brexit – there are clear indications of hard times ahead. Now is the time for businesses and their advisers to stop and take stock of all aspects of company operations.

There are other experienced eyes watching the economic weather forecast and they, too, are reaching similar conclusions to myself – I will be reporting more about this in the next blog.

Meanwhile, here are some questions that my accountancy colleagues should be asking the owners and directors of their client businesses.

• Are your financial/trading records up to date?
• Do you know the financial state of the business – are you doing monthly (or at least quarterly) management accounts?
• Have you done a business plan?
• Have you done any forecasts for the business (short and long term)?
• Are you tracking those forecasts with actual results?
• Are you running lean enough?
• Can you cut costs without cutting opportunities or operations?
• Are your profit margins big enough? If small profit margins can kill Carillion (and they did) they can certainly kill an otherwise well-run SME.
• What happens to working capital if the overdraft is turned off?
• What happens if you lose (say) 30% of your clients?
• Are you using the online/social media offerings to broaden and protect your market share?

Right now, it is more important than ever to look ahead, scan the horizon for potential threats, take a hard look at how your company is set up and batten down the hatches for a downturn that could last for two or three years. It could be longer, given the circus that is Brexit at present…

If towns like Burslem had read the signs and adapted to the new world that was emerging then, it’s highly likely that you could be walking past The Leopard today with a smile on your face and an apple in your pocket.

It is so important to make sure that your clients are at least up to date with their financial records.  They then stand a chance of seeing the lagging (if not the future) financial measures in as short a time as possible.  If you do not already offer bookkeeping services to your clients, I would strongly suggest that you find a reliable provider as they can be worth their weight in gold to your clients!