Advice NI urges businesses to take defensive action to avoid risk of financial difficulties

Business owners across Northern Ireland are feeling the brunt of the rising cost of living on their revenues.

With inflation closely paired with a sharp decline in consumer spending, Advice NI is urging businesses to take defensive action with their budgeting as the new financial year begins for many.

In the last 12 months Advice NI’s specialist business debt advisers have dealt with over 120 cases, managing nearly £7m of business debt with an average debt of £20,600 per agreement.

Defensive budgeting is a new style of budgeting whereby a business can take defensive action to keep the company in profit and mitigate risk. It involves taking a ‘worst case scenario’ or pessimistic view to your budgeting and forecasting.

Sinead Campbell, head of money debt and quality at Advice NI, said: “With the new financial year soon to begin, businesses should be taking defensive action and thinking realistically about the risks they are facing and how to overcome these. Defensive budgeting should allow for things like increases in wages and changes to business taxation.

“Businesses can also mitigate risk by improving their cash flow including areas to cut back on or save which can often come from negotiating with suppliers on pricing or reviewing your own pricing structure. Another helpful tip is staying on top of your credit controls - the process of managing accounts and invoices which are yet to be paid – this can be done by setting clear credit terms with customers which makes it easier to oversee late or missed payments and invoice quickly and accurately.”

Most businesses across Northern Ireland will be further deflated by the recent confirmation from Chancellor Jeremy Hunt that corporation tax will rise from next month, adding additional costs to businesses with a turnover of more than £50,000.

“Business taxation changes are approaching which will have a huge impact on small and medium-sized businesses throughout 2023,” explained Sinead.

“We know that business owners are facing serious financial strain and the unfortunate reality is that we’re seeing closures every week – especially within the hospitality sector. With more price increases possibly on the horizon, hikes in interest rates and a very real prospect of global recession, many businesses are at risk of financial strain if they don’t take immediate action.

“Defensive budgeting is a shift in how businesses assess their spending and budgets - by creating a strict realistic forecast and continuously reviewing this as prices increase or circumstances change. Moving away from traditional budgeting is a smart move in this climate and we’re seeing an increase in the lean budgeting approach which aims to minimise overhead by supporting businesses’ value streams over projects - allowing business owners to play out harsh realities and stay one step ahead.”

Advice NI predicts that 2023 will be a challenging year for Northern Ireland’s business community but it’s not all doom and gloom, according to Sinead who says there is often an available solution for businesses trying to deal with their finances and debt.

Sinead added: “If your business is experiencing financial difficulties, support is available, and Advice NI is often an excellent first stop to finding a solution. We want businesses to know that they’re not alone, insolvency isn’t the only answer and there may be another way.

“Struggling businesses can contact Advice NI by calling the Freephone helpline on 0800 915 4604 where they can speak directly with a business debt adviser between 9am and 5pm, Monday to Friday. Business owners can also browse our website which offers a host of useful online business factsheets and letter templates, as well as tools and information such as a budget planner which can be useful for revenue forecasting and an energy comparison tool detailing supplier tariffs throughout Northern Ireland.”

Advice NI and the Independent Advice Network have 65 members and 300 advisers across Northern Ireland, all providing free and confidential advice. Any business or individual can access Advice NI’s money and debt on 0800 915 4604 or by emailing [email protected].