Top tips for SMEs to mitigate risk in uncertain times

As international vaccine supply issues and the consequences of the Brexit deal continue to disrupt the economy, it’s clear that uncertainty is here to stay. The furlough scheme has supported many small businesses, and with the roadmap out of lockdown, many are considering how to build their business back up. Meanwhile, rising inflation and the suspension of tax thresholds mean consumers will be poorer in real terms – and therefore less likely to spend. With so much ambiguity, SMEs are wondering what the future will hold. 

Unfortunately, we can’t say what’s around the next corner – but that doesn’t mean that businesses are helpless. Instead, they can take meaningful steps to ensure that they are prepared for any eventuality. Here’s how:

Cash flow remains key 

As SME leaders know, there can be no viable business without cash flow. Government loans have played a significant role in supporting businesses so far, but some, like the Bounce Back Loan Scheme, are coming to an end soon. So, SMEs need to find ways to sustain their cash flow by reviewing costs, preserving cash, and adapting their spending habits and finance processes for the longer term. 

If businesses haven’t already adopted efficient money management, now is the time to do so. Modern expense management solutions are a good, logical first step, as they give SMEs complete visibility over what they’re spending on and save time on admin, too. Businesses should also consider negotiating shorter payment terms and break clauses in their contracts with suppliers, given that the economic effects of the pandemic are forecasted to continue well into 2022.

One way to stay on top of the market’s condition is to monitor currency prices, as they’re a leading indicator of confidence or fear. Business owners can keep an eye on currency markets with quick online updates. This is even more vital for businesses operating across multiple countries, as ongoing volatility in exchange rates can prove costly. For these businesses, it’s important to choose a reliable international payments partner that can get the best rate available on the day or help lock in favourable rates over the long term. 

Focusing on communication 

Relationships with customers can be one of the significant advantages that small businesses have over their larger rivals. While internet giants can offer rock-bottom prices and next-day delivery, local businesses provide a human connection, and SMEs that embrace this will reap the benefits. During the pandemic, many of the most successful businesses have maintained close communication with customers over social media. Nurturing relationships will be even more important as people begin to emerge from their homes after a year of on-and-off isolation. 

Businesses should also participate in the SME community, both locally and through national associations. Other SMEs in your industry or area can warn of issues and give first-person expertise on how to overcome them. Similarly, organisations such as the FSB and Enterprise Nation offer timely advice on matters and point businesses toward valuable resources.

Choosing a direction for the future 

Many SMEs were forced to pivot at the onset of the pandemic, and the online strategies they have adopted have proven critical. This experience will serve them well as we move into the next phase of the Covid crisis. Maintaining and growing revenue streams should continue to be a priority. Reopening the economy to its original state will take some time while reverting to old models might not be an option in our “new normal”. 

This balance will look different for every business. For example, some will have found that the expense of a brick-and-mortar operation was unnecessary and will remain entirely online, while others will opt for a hybrid model. Business owners will need to consult their data to determine the right balance for them.

While most business owners put investment on pause during turbulent times, those who double down on investing stand to benefit. Moments of worldwide change, such as our current one, are the start of a new paradigm, and businesses that invest in tech, people, R&D, and logistics will be the first ones off the starting blocks. This is a significant advantage over-cautious competitors who are waiting out the pandemic.

The economy is experiencing “long Covid” 

The impact of the coronavirus on the economy is likely to be sustained. It’s unlikely that the economy will return to business as usual until 2022 or potentially later. However, this doesn’t mean that individual SMEs can’t succeed – if they remain agile, diligent, and lookout for signs of change, businesses can set themselves up to thrive in a post-Covid world.