FINANCE
UKRAINE CRISIS AND RISING FUEL PRICES OVERTAKE COVID AS TOP CONCERN FOR SMES
Overnight , the outbreak of war in Ukraine has had a significant impact on UK small business owner confidence .
Nationally , 78 per cent of small business owners say there are worries that keep them awake at night - and the feared implications of the Ukraine conflict have cast aside small business concerns over Covid , Brexit and red tape - according to a new survey by Novuna Business Finance ( previously known as Hitachi Capital Business Finance ).
The top three concerns for small business owners are all related to unfolding events in Eastern Europe and its economic impact in the UK . A quarter of small businesses were worried about the prospect of the Ukraine crisis turning into a European war ( 22 per cent ). Alongside this , there was concern over general market volatility ( 22 per cent ), and the impact of the Ukraine crisis on soaring fuel prices and cost of living hikes ( 19 per cent ). Some analysts are already predicting the cost of the war for the average British household to total just under £ 1,300 in 2022 , with research suggesting that the average small business could only afford a £ 147 monthly rise in costs before they hurt financially .
As many small businesses re-emerge from the pandemic only to go into a new era of uncertainty , the research also suggests small businesses foresee disruptive issues they will need to manage in the months ahead . Nationally , 19 per cent of small businesses were worried about retaining established business , 16 per cent predicted headaches with recruitment and 15 per cent were concerned about managing cashflow in uncertain times .
Why cashflow and resource planning are essential for growth
All businesses need to know where they are going and , vitally , how to get there . If you ’ re planning for growth , the key to success is carefully understanding your numbers and resources
Cashflow planning is essential . On the most basic level , work out what is coming in and what is going out . Factor into this , too , the impact Covid business support may have . For example , you may have a higher than usual tax bill because of grants you claimed , or CBILs / BBLs repayments may have started .
With rising inflation affecting personal budgets as well as the business , your business will need to give you a higher dividend just to stand still . If you want to earn more , this must be even higher .
What if you have a large expense to fund personally ? Finance for this has to come from your business , and here cashflow planning is key . Any cashflow planning must factor in inflation , your personal circumstances and your plans for your business .
Here ’ s an example . You want to draw an additional £ 30k per year in dividends to fund private education for your two children .
What do you need your business to bring in , in order to release this amount ? If you are
Despite both Covid and Brexit heavily occupying business owners ’ minds over the past few years , the new research suggests that they are no longer at the forefront of today ' s concerns , with only 13 per cent now worried about the economic impact of both Brexit on their business - and just 11 per cent concerned about the public health impact of Covid .
Those issues that were of less concern included red tape and excessive regulation , employee skill gaps and business rates .
Jo Morris , Head of Insight at Novuna Business Finance said , " We have all seen the devastating images from Ukraine on our TV screens and the economic impact is already being felt at home . Small business owners are concerned about disruption to supply chain , managing growth during a new era of economic uncertainty and absorbing the impacting of rising prices , particularly with energy . That said , UK SME ’ s remain optimist about growth . Since the outbreak of the war , 50 per cent of business leaders still predict growth for the next three months .”
Top issues keeping small business owners awake at night :
Prospect of Ukraine crisis turning into a European war : 22 % General economic volatility : 22 % Impact of Ukraine crisis on fuel crisis and cost of living : 19 %
a higher rate taxpayer , your dividend must be an additional £ 49k before tax .
To take £ 49k out of the business it must generate £ 60k pre-corporation tax . If you manufacture a product with a 40 % profit margin , you need to generate £ 150k more sales ; £ 150k to take £ 30k from the business . This demonstrates perfectly the need for cashflow planning and running the numbers , and it ’ s just as important whether you are a sole trader or running a multi-million pound company .
Add to this the need to plan for resources . If you plan for growth , you must plan for staffing . To make an extra £ 150k in sales , do you need more staff to deal with this upturn in business ? Can your staff do more , do you need to recruit , or can you upskill your existing team ?
Look at your other resources . Do you need new equipment to keep up with demand ? Maybe you even need bigger premises ?
If you run a VAT registered business , and are yet to file your returns under the new Making Tax Digital ( MTD ) regime , then you need to plan this without delay .
MTD has been compulsory for VAT registered businesses with a taxable turnover of more than £ 85,000 since April , 2019 . However , from this April all VAT registered businesses – regardless of turnover – were drawn into the MTD system . This means VAT registered businesses are no longer able to submit VAT returns manually through the HMRC online service .
If this affects you , then you need to plan immediately ; start keeping VAT records digitally and submit VAT returns using compatible software , for all periods commencing on or after 1st April 2022 .
We love helping our clients with resource and cashflow planning . If you are planning for growth and would like us to assist you , please get in touch .
To talk to Michael Blaken at Optimum Professional Services about tax planning and accountancy email mblaken @ optps . co . uk , call 01793 538 198 or visit : www . optps . co . uk
Retaining business : 19 % Recruitment : 16 % Managing cash flow : 15 % Tax and interest rates : 14 % The long-term economic impact of Covid on my business : 13 % The impact of Brexit on my business : 13 % The current public health impact of Covid on my business : 11 % Bad debts : 11 % The effects of unpredictable / extreme weather : 10 % Compliance and Regulations : 10 % Employee skill gaps and shortages : 9 % Borrowing and lending : 8 % Business rates : 8 % Considering better finance options : 7 % Red tape ( i . e ., excessive bureaucracy and regulation ): 7 % Not applicable - “ Nothing is keeping me awake at night ” 22 %
The research was conducted by MaruBlue among a representative sample of 272 small business decision makers between 5th-7th March 2022 .
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