The rise in energy and other costs remains at the forefront of the UK political agenda. Matthew Barton discusses some areas to consider to mitigate the impact this could have on businesses over the coming months.
Large numbers of owner managed businesses, including across our own client base, operate in heavily energy-intensive sectors such as manufacturing and engineering. As a result, energy prices remains one of the first things that comes up when we speak to our clients, alongside a widespread rise in costs hitting businesses in all sectors.
Being aware of the support measures on offer is essential for cashflow forecasting and planning over the coming winter. Following on from the mini budget, the following announcements can help your business’ cashflow in the short term:
The Energy Relief Scheme
The Energy Relief Scheme will be applied to business energy usage from 1st October 2022 to 31st March 2023 by automatic discount.
For non-domestic energy users in the UK, including businesses, voluntary organisations and public sector organisations who are either on a fixed price contract, variable contract or flexible purchase will benefit from a government supported price of £211 per megawatt hour (MWh) for electricity and £75 per MWh for gas.
The government claims that this freeze on energy prices will lead to businesses paying less than half the rates that were expected this winter, thanks to a £60 billion energy package.
Corporation tax freeze
Also announced in the mini budget was a corporation tax freeze at 19%. This is in place of a proposed tax hike to 25% that was set to come into play in April 2023.
You can find more information on the corporation tax rise cancellation here.
Reversal of tax increases
Reversal of the National Insurance increase of 1.25% will mean that a predicted 920,000 businesses are set to save almost £10,000 in the upcoming year. There has of course been a huge wider economic debate around the Government’s tax strategy and its potential wider implications. However, for businesses it is important to focus on the benefits and support available and ensuring these are maximised.
In addition to the reversal of the National Insurance increase, it is important to remember that dividend tax rates will also no longer be increased.
You can read more about the current dividend tax rates here.
How else can your business boost cashflow this winter?
As the coming winter brings increased risk and uncertainty for many businesses, here are 8 additional steps you can take to prepare your business:
- Review all business costs – Reviewing business costs is a perfect first port of call and will help you to identify where your money is going and additional savings that can be made, as well as identifying the areas where cost increases are unavoidable and need to be planned for.
- Review sales prices – To ensure that you are charging the most competitive prices for your business and to reflect the ever-changing cost base, it’s important to review the prices at which you are selling your products or services.
- Check when your energy deal expires- Knowing what kind of deal you are in and for how long will allow you to plan ahead for the costs that your business will incur. Some businesses will incur surcharges when they leave a fixed energy contract, so it’s important to plan for additional costs.
- Check supplier credit terms – Using your supplier credit terms can help smooth out peaks and troughs in your cashflow. Take a look at your biggest suppliers and initiate conversations around the credit terms that they offer. You could be surprised at what can be agreed.
- . Look at funding options- There are a number of funding options such as grants and invoice discounting on offer to SMEs. You can find out more about how you can inject extra cash into your cashflow through grant funding opportunities by staying up to date with your local authority’s and government’s websites.
- Check your credit control is working- Making sure that you only give out credit to customers who are able to pay you back is vital to ensuring that you don’t run into financial problems later down the line. Close monitoring can also help deal with potential bad debt issues earlier.
- Consider asset finance- If you operate in a sector such as life science, manufacturing or construction then chances are that your business will hold its own machinery of some sort. If this is unfinanced, you could consider asset finance to boost your cashflow. This will allow your business to access more working capital as needed. You can find more about this here.
- HMRC payment plans- If you identify any particularly difficult periods, it could be worth speaking to HMRC about setting up a payment plan. They have a dedicated phoneline where you can discuss your reasoning for delaying taxes and the next steps. You can find out more about this here.
Supporting you with your cashflow this winter
As recent government announcements offer short-term relief for businesses, knowing how to further boost your cashflow will stand you in good stead this winter. Whether that be taking an alternative approach to your tax planning, seeking additional funding or reviewing business controls, our experts are here to support you through the months to come.