The effects of the recession are being felt across all industries; few businesses can feel safe from the dangers of the downturn. But with consumer spending at a sustained low and banks holding back on lending, it is the smaller businesses, above all those which are heavily dependent on funding, that are really feeling the impact.
The Open University Business School's Quarterly Survey of Small Businesses in Britain published in March this year highlighted that it is indeed the small firms that have been hardest hit while business adviser, BDO Stoy Hayward, predicts that 36,000 small firms will close down this year as a result of the economic situation.
As the recession continues, small businesses are also feeling the weight of the cost of running their businesses, struggling with salary bills and suffering from increased late payments. On top of this, banks are tightening their belts at a time when small businesses most need funding. A survey by Cambridge University found that the average level of funding required by small businesses has soared from £82,000 in 2004 to £470,000 in 2007.
In order to persuade banks to lend, businesses need to present solid business cases that instill confidence in the company's ability to deliver on its projections.
However, while the outlook is less than rosy, small businesses should not despair. There are many resources available offering support to small businesses during these turbulent times. The advice from these bodies is that providing companies take measures to ensure that the business is being tightly managed, using its staff effectively, focused on output, has a clear direction and is in control of its finances they will be in good shape to weather the economic storm.
Managing all aspects of a small company to this end may seem like a difficult and time consuming challenge and one which requires more heads than would be financially viable to use. But rather than taking on new staff, company directors can cost effectively look to implementing software tools that can take on some of these information management tasks - and arguably do these more efficiently than staff themselves. There is an array of dedicated and specialist tools available, it is really a case of hunting around for the most suitable tool.
Company directors need to be able to dive into detail but also see information as a whole, spot evolving patterns and draw meaningful conclusions in order to manage their business effectively.
Drawing information on work in progress, people and finance together is relatively simple if you have an integrated IT system - the problem is that most midsized and small companies do not have this, and must rely on disparate systems which output information that must be interpreted and integrated by hand.
We estimate that only around a fifth of project management, timesheet and billing systems are integrated at small to mid-sized companies today. One reason for this is that these companies are less likely to recognise the need to deal with data integration issues - until their businesses reach a size where the problem is already endemic.
The predominance of standalone software tools creates ‘data islands' within organisations. The resulting inaccuracy of data is unlikely to inspire confidence within your company or amongst your clients, and is almost certainly going to result in mis-billing. In today's climate, over-billing without crystal clear justification is as dangerous to your future as under-billing and loss of potential revenue.
Although investing in major software upgrades at this point in time may seem counter-intuitive, small and mid-sized companies should consider the value that a dedicated time, workload and personnel management tool can bring. The initial investment in integrated tools and training may seem daunting, but the loss of a customer is likely to be a far greater cost. Take heart though - because when the good times return, such tools are also a platform for maximizing revenue potential and growth, making them a very positive long term investment.
Top tips for small businesses looking to combat adverse business climate:
1. Keep a steady eye on cash flow and payments due in
2. Monitor and maximise use of your staff time
3. Think beyond the recession. Plan ahead to ensure you are in control of where the firm is heading and where it aims to be in 2-5 years' time
4. Keep marketing and publicising your business and its offerings
5. Ensure existing customers are not neglected in your plight to win new business
6. Pick the right tools for your business' specific needs. Spreadsheets are for numbers and can be overly relied upon for more sophisticated functions. Investment in the right tools will save you money.
For more information visit www.teamplan.co.uk/express [1]