Top tips for FDs in 2011

Remember cash is king
Looking at your sales figures and forecasts, it’s sometimes easy to get carried away with how well you’re doing on paper, but there’s no better position for a business to be in than having cash in the bank.

Make sure you have a robust system in place for managing cashflow. Ensure people are chasing overdue invoices, but also take a more strategic view of your debtor book.

Make sure you don’t have too much exposure with one or two debtors as company failures can significantly hit cashflow and put huge pressure on the business.

Be as tax efficient as possible
The 1 per cent rise in National Insurance Contributions (NIC) means you will have to budget for increased employment costs.

Speak to a professional advisor to ensure the business is taking advantage of tax efficient pay, such as salary sacrifice agreements for things like employee pensions, childcare vouchers and increased annual leave.

Also take advantage of other measures like R&D Enhanced Tax Relief for SMEs which has been increased to 175 per cent (previously 150 per cent) and means you can get tax relief on £1,750 for every £1,000 of R&D.

Also note changes to the Annual Investment Allowance (AIA) which will reduce from £100,000 to £25,000 from 2012, making some large capital investments more tax efficient in the short term.

‘Audit’ your auditor to keep costs down
Just like we constantly review our home energy supplier to keep costs down, the same goes for elements of necessary company expenditure.

Recent and planned changes to international auditing rules are expected to increase the cost of financial auditing and reporting for some companies. Paying audit fees can be a financial burden, but if you speak to your auditor in advance about likely fees, there may be a way to keep costs down.

The same goes for other significant but compulsory company expenditure – keep a close eye on all costs.

Talk to your lenders
Keep the lines of communication open with your lenders, and be prepared to talk to other potential funders who may be able to provide a more flexible solution.

As many an FD will know, it becomes far more difficult to secure increased overdrafts or working capital support if your back is against the wall, so keep this constantly under review and don’t leave re-financing until it’s too late.

Remain calm, focused and disciplined
If trading conditions become more difficult, it’s easy to be panicked into knee-jerk reactions, such as cutting staff without strategic thought for the longer term needs of the business.

Remember, there are a number of options for holding onto staff while still reducing overheads, such as reducing working hours or asking staff to take voluntary unpaid leave. Take the time to look at all aspects of the business and make sure the fundamentals continue to be done right, such as the production of detailed, accurate and up-to-date management accounts.

Review management accounts and all other relevant trading and financial information at regular board meetings and encourage all directors to raise specific concerns.

Above all, try not to lose too much sleep.

Christine Wilson
Moore and Smalley Chartered Accountants and Business Advisors