The current economic climate is one of turmoil and unparalleled change, which is likely to continue into the future. There are many forces which are influencing the world in which we all operate now. Have you considered the impact of ever changing technology on the way your business functions? What about the way the industry in which you operate is changing? And the way the demographics of the population are shifting plus the impact of environmental and sustainability issues are factors no-one can afford to ignore. Any business which is to survive and prosper needs to accept these, plan ahead and design their strategy to focus on meeting the challenges that lie ahead.
Here at Zenon we have the advantage of working with many different businesses in a wide variety of sectors. This gives us the opportunity to gain a real feel for the challenges and opportunities facing different parts of the economy, and see how different strategies and practices have been implemented and the effects of these. We can give you the benefit of these insights if we work with you in some of the ways detailed in the following sections. Often, management teams need to revisit the basics of good business practice, which can be overlooked when growth is the focus. Involving Zenon brings you our financial expertise and business experience to challenge your forecasts and strategies, and suggest ways in which you can operate more effectively in the future – be it ways to maximise cash flow, minimise tax paid, protect your personal wealth or take advantage of the economic climate.
It is vital to appreciate the difference between the profit and loss account (measuring profit) and the cash flow forecast (predicting cash flow requirements). Profitable business can and do fail because they do not have sufficient cash flow to meet their commitments. Zenon can assist you with preparing and reviewing both cash flow and profit forecasts, key management tools at any time but vital in the current economic environment.
Most businesses are acutely aware that managing uncertain or deteriorating cash flow is a significant business challenge. For this reason, financial backers, be they debt or equity based, will want to understand how a forecast is built and that it is based on credible and realistic financial information. Specifically, they will wish to see and challenge the assumptions used, which may include price growth, inflation factors, credit terms, stock management, gross margin growth and staffing requirements to name but a few. Sensitivity analysis – amending a forecast to deal with under-performance and over-performance – can indicate the “headroom” in cash resources to deal with the unexpected and to ensure compliance with financial covenants. It must be seen that the management team has the ability to manage and deliver the plan. Here at Zenon we have considerable experience of building and challenging forecasts – from fairly simple models to complex business structures that include overseas trading.
Tax is often one of the biggest overheads a business suffers, yet is an area where, with our expert advice and planning, you can potentially reduce the amount of tax paid and influence the timing of when it is due.
There are ways of managing your taxable profits which can beneficially affect the timing of corporation tax payments. Our expert advisors can help you plan things such as when to pay bonuses to the directors or when to make capital expenditure to take best advantage of capital allowances.
Payroll packages are another area where, with some careful tax planning, you can ensure employees are properly remunerated yet bring in cost savings for the company. Company cars, pensions, childcare and share options are all benefits to consider, and the cost savings of restructuring packages can be significant.
Zenon can also advise you on VAT cash flow planning. There may be ways of delaying the VAT payments you have to make which can help with your cash flow.
On top of these basic proposals, there are many more sophisticated tax planning ideas we can discuss with you, which may be beneficial if you are thinking about commercial transactions or restructuring your business.
In the current economic climate, the first consideration has to be whether the asset is crucial for the business right now. If it is, consider how the purchase is to be financed – negotiate as much as possible on price, and try to use borrowed funds and not all cash. We can advise you about which capital expenditure can benefit from immediate tax relief for 100% of the cost including the annual investment allowance for the first £25,000 of qualifying expenditure.
Zenon’s specialist Transactions Services team has found that ambitious and motivated companies have been able to purchase other businesses at competitive prices, to consolidate their market position, facilitate growth and strengthen their balance sheet. There are plenty of opportunities for companies who are alert to situations where owners want a quick sale to get out of the market, or where larger organisations are trying to shed non-core business units. The team at Zenon are experienced not only in the financial due diligence work, but also the project management of these transactions. Involving us allows you to be fully informed and involved, yet still be attentive to your existing business.
When the business climate is tough, there can be many pressures to put money back into the business, or offer your personal assets as security for the business. To avoid throwing good money after bad, you need to be sure that if you do invest any money it is the right business decision to make. Also, consider ways of introducing money other than as an unsecured loan, which could improve the chances of recovering your funds if trading does cease.