The Effects of Rising Costs on Small Businesses
It’s no secret that small businesses are struggling to survive in today’s economy. With constant rising costs and inflation at an all-time high, it has become increasingly difficult for business owners to keep their heads above water, add in the value of the pound dropping significantly and import prices increasing, it’s a tough environment to trade in.
Small businesses are the lifeblood of any economy, yet they are feeling the squeeze more than ever before and the direct impact on businesses’ cash flow is starting to show.
Increased costs that small businesses are facing
Costs outside of an SME’s direct control have spiralled with the sharp increase in energy prices and rents also increasing in many parts of the country, as demand for commercial space has outstripped supply. This is particularly acute in London, where businesses are being forced to look further afield for affordable office space.
The general cost of living has also significantly increased meaning that staff wages are having to stretch further and leaving many small business owners needing to increase staff wages to retain personnel.
The Knock-On Effects
The rising cost of imports is having a knock-on effect on the prices that businesses can charge for their goods and services. In many cases, businesses are being forced to absorb these costs, eating into their profits.
Whilst unemployment is currently at a historic low, the rising costs could start to have a knock-on effect on employment. Small businesses could start to find it increasingly difficult to afford to pay staff, leading to redundancies and a rise in unemployment.
The effects of the rising costs are being felt across the economy and are likely to continue for some time to come but the situation is particularly challenging for small businesses, which often have thinner profit margins than larger businesses and are less able to weather cost increases.
How constant rising costs affect cash flow
The constant pressure on small businesses can have a serious effect on cash flow, as they struggle to keep up with rising costs. This can lead to a number of problems, such as late payments, defaults on loans and ultimately the failure of the business.
There are several ways in which small businesses can protect themselves from the effects of rising costs, such as hedging their exposure to inflation, diversifying their income streams, and improving their cash flow management.
Invoice Finance can set you straight!
Small business owners are facing an uncertain future, and many are struggling to keep their businesses afloat. This can be an extremely confusing and challenging time, which is why many of them turn to an invoice finance agreement to help them through. With an invoice finance agreement in place, you can be assured that you will get access to the cash locked up in outstanding invoices and that your credit control is expertly managed. When your business is already struggling with a negative cash flow due to rising costs the last thing your business needs is late payments on the invoices you issue.
If you are a small business owner struggling to keep on top of your finances, then please get in touch. We can help you to find the funding solution for your business so that you can focus on what you do best – running your business.