By Mike Elliff, CEO of Tyl by NatWest
The cost-of-living crisis and impending recession has understandably become a major concern for businesses in the UK. In fact, one in five companies expect the impact from the crisis will be worse than the pandemic, as reported in The Times. Businesses are therefore continuously looking for ways to save as they feel the pressures of inflation, rising energy costs, and supply chain issues.
The thought of a recession for business owners is daunting and worrying, however, with preparation businesses can attempt to mitigate the worst impacts of economic downturn and ensure they are equipped to navigate the storm of a recession.
Recessions create hostile business environments where economic growth stalls as consumers become wary of spending. This poses a threat to sales and therefore overall profit and cash flow. Small businesses are already feeling the squeeze following the cost-of-living crisis, with a OnePoll survey revealing that three quarters of small businesses (78%) see the cost-of-living crisis as the biggest threat to their survival.
Despite the challenges, often small businesses show remarkable flexibility and creativity in their approach to using innovative solutions to overcome the challenges facing them. So how can we put the lessons of previous economic downturns to work in helping us prepare?
Taking control and gaining clarity over finances
Preparation begins with understanding. It is essential businesses can analyse the potential impact on their bottom line and the actions that can be taken to to mitigate these impacts. In order to see the areas your business might be vulnerable you need to have a clear picture of your current finances including cashflow.
To achieve tighter control over finances and improve cash flow, adopting more strategic approach is essential. Using services and tools such as the Tyl Portal, you are able to gather insight and data which can be utilised to improve organisation, time management and business operations. The portal facilitates this by enabling business owners to track sales, payments and manage invoices, providing businesses owners
Providing business owners with the tools, such as the Tyl Portal, is essential for business owners to achieve tighter financial control, through accurate and quick analysis.
In turn, this highlights the importance of having accurate and real-time financial records to analyse current business operations and overall performance, to be able to future proof the business. Through this analysis business owners can determine potential areas of their business which may be vulnerable to the impacts of the recession and other areas where less investment may be required.
Invest in new technology
Although business owners often see a recession as a time to batten down the hatches and play it safe, economic downturn has proven to actually encourage the adoption of new technologies as stated in HBR. Economist theorise that companies invest in technology during recessions because their opportunity cost is lower that it would be in economically stronger times. As there is less need for investment into operations with lower sales and output, resources can be rediverted into exploring innovative technologies to help streamline businesses.
New banking technologies present SMEs with the opportunity to save time and money.. Efficiency is improved through automated and real-time data collection. Instead of manually inputting data, which is often time and labour intensive, the ability and speed of automated data entry can save time. This time can then be reinvested into improving internal processes for better operational performance and customer experience.
Embracing innovative payment methods provides business owners with accurate data and financial information. Features such as the Tyl Portal enables business owners to see transactions, invoices, settlement history and peak business times. This helps business owners manage inventory and staffing more efficiently, reducing overhead costs. As previously discussed, having clarity and control over finances is of paramount importance to survival; technology can assist and provide businesses owners with the tools needed to achieve this.
Build a loyal customer base and strong customer experience
Once business owners have clearer insight on their business operations such as inventory and staffing, there is a greater opportunity to focus on the customers. By business owners adopting modern technologies, they can ensure they are understanding and therefore meeting the evolving customer expectations and demands. In turn, this will improve the customer journey, increasing both customer retention and loyalty.
As well as improving business performance, business owners can significantly improve customer loyalty by showing support for their local community. Tyl research from March this year found that, despite concerns over price, 73% of shoppers say they want to support their local community or high street with their shopping habits. However, the research has also shown that 45% of businesses do not advertise the fact that they are local. Business owners have the opportunity market themselves, reminding locals that they too want to support their local community and charities.
Through programmes such as Tyl by NatWest’s Giveback Community Fund businesses can show their support for charity. With every card transaction Tyl merchants take, Tyl donates a portion of the revenue to the Giveback Community Fund, raising over £340,000 so far for charities such as Prince’s Trust, Hospice UK, and Macmillan Cancer Support. By showing commitment to local communities, businesses can cultivate repeat sales and customers.
Preparation for the looming recension is essential to a business’s survival, ensuring they are equipped to overcome the inevitable challenges they will face in the coming year. Utilising the tools and services available from payment providers can significantly help business owners with financial and operational management and control. In turn, using the accurate and real-time data, business owners can create and build a robust financial plan informing strategic decisions to navigate the recession.