Award-winning Cumbrian accountancy firm, Lamont Pridmore, is concerned for businesses who are being squeezed by rising costs – but call on owners to act now to forecast the impact and develop a plan.
Business leaders across the UK are grappling with increasing prices, including higher wage costs, national living and minimum wage increases, national insurance increases, energy prices, inflation on supplier costs, particularly imported goods, and other supply chain pressures.
Employers will have to contend with a 1.25 percentage point increase in the National Insurance rate from April for the contributions they make and, at the same time, higher National Living and Minimum Wage rates. From 1st April, the headline rate of the minimum wage will rise 6.6% to £9.50.
Much like many families and communities, businesses are struggling with the cost-of-living crisis, with many finding it challenging to maintain a healthy cash flow as costs and taxation continuously rise.
On top of these challenges, many businesses are having to deal with the start of the repayment of COVID loans, international trade issues and a growing late payment problem, which the Federation of Small Businesses (FSB) has estimated may lead to the failure of more than 400,000 companies.
The same study shows that more than half of small and medium-sized businesses see energy costs as the biggest challenge, especially as suppliers estimate that costs may rise by as much as 50 per cent in 2022.
Graham Lamont, (pictured right) Chief Executive at Lamont Pridmore, said: “Given the incredible challenges that many businesses have had to grapple with over the last two years, rising costs is something that could have a massive impact on the profitability and cash flow of many firms.
Graham said that it is more important than ever for businesses to prepare a financial forecast for the coming year in order to assess these impacts and decide how to mitigate them through efficiency gains or price increases. Regular management information on a monthly or quarterly basis to assess progress is also vital for the next two years and beyond.
Inevitably, higher costs for businesses must, in some cases, be passed on to customers, Graham explained, but he said it was worth having conversations about this beforehand to forewarn those that use a business’s services or products regularly.
“Everyone is in the same boat. It never hurts to speak with regular customers to explain that costs may have to increase in future in line with inflation – it just gives them time to think about the impact on them and how they will deal with it, rather than facing a surprise bill in future,” Graham added.
As for overdue payments, Lamont Pridmore Partner, Chris Lamont, says that businesses may need to get even more organised.
“Late payments have plagued SMEs for years and caused many companies to experience cash flow issues,” he said. “There is often a fine balance when it comes to credit control between upsetting customers and getting paid on time.
“The new year and costs crisis gives business owners an ideal opportunity to amend their terms and conditions, review their regular errant payers and generally tighten up their collection and payment processes.”
If you are struggling with the cost crisis, speak to Lamont Pridmore today. To find out more about Lamont Pridmore tax, accounting and business advisory services, please visit www.lamontpridmore.co.uk or call 0800 2346978.
