Your 2025 business mindset
How to navigate Q1of this business-critical year with purpose, cautious optimism – and a keen eye on the finances that matter.
Words: Richard Starkey, Business Control.
The last five years have seen all sorts of upheaval. Brexit. The Pandemic. Chaotic Budgets. A revolving door of Prime Ministers. And, more recently, a new government. Times have been unpredictable, and that’s caused not a small amount of turbulence in the world of business. But looking ahead to 2025, there’s now at least one speck of light shining at the end of the tunnel: certainty.
Not the easy thing
When Rachel Reeves opened the red box, we knew whatever announcements were coming weren’t going to be what all of us wanted to hear. But what we didn’t know, was what the details were going to look like; the policy headlines and the finer technicalities in small print below them. Now we do. Lowering the National Insurance threshold; that’s going to add costs for businesses. Increasing the minimum wage; for a lot of businesses, that’s going to add costs too. But – and here’s the key point – we now know what those costs look like and where they’re going to hit.
Brighter (long-term) forecast
Another reason to allow for a little optimism right now is the (slightly) rosier economic outlook. The Office for Budget Responsibility predicts that the UK economy will grow by 2% in 2025 – double the rate of growth it predicted for 2024. Meanwhile, KPMG speculates that by the end of 2025, the Bank of England will have cut the base rate to 3.5%, and that, coupled with the improving growth outlook, will replenish appetite for investment.
Let’s be real
But even with the reassurance delivered by the return of political stability and those small but encouraging indications that economic recovery might be somewhere in sight, a lot of businesses are feeling the pinch. And that’s not going to change overnight. Choppy waters remain to be navigated after all, and keeping the lights on is a top priority right now. During Q1 especially, that’s going to mean watching the right numbers. Do that, and you’ll be ready to make the snap decisions that will help keep your finances stay the course.
Right insight
First thing’s first. Data. That’s where you’ll find what you need to know to make the really smart financial decisions. And to get a clear view of the financial insights that matter to you, you’ll need a good accounting platform. We’re using Xero more than most. It provides a clear view of exactly what’s going on with your gross margin, profit, and tax figures. With that, you’ll have a good indication of where your wider profits and losses stand. Then, you’ll know which levers you need to pull.
Another way to ensure access to the kind of accurate, up-to-date financial information that makes all the difference are clean, monthly management accounts. The precise financial statements they produce are key to identifying trends, monitoring performance, and responding to issues. At pace. And clarity of that kind doesn’t just enable short-term wins. It also unlocks effective, long-term strategic planning.
Eyes on the competition
The scope of financial insight gathering extends beyond your internal figures. Most of your competitors’ numbers will be beyond your field of vision. That goes without saying. But a valuable few are in plain sight. The one you’ll want to pay closest attention to is their pricing. What service levels are they offering? What do they charge for them? Find out, and you can adjust your own prices to your advantage.
Beyond sales
Sales are a great place to start. But if you’re serious about boosting your bottom line, you’ll do well to step back and take stock of the bigger picture. Every little financial detail of it. Savings can have just as much impact. So dive into the numbers and ask yourself, ‘What, exactly, makes up my overheads?’ Wages are more than likely a significant chunk of them. You want to pay your staff fairly, of course. But are there smarter ways of doing that? For instance, are you paying your directors the payroll or dividends that work best for their personal tax scenarios?
And keep a lookout for potential upcoming costs. Remember the Autumn Budget announcements that we mentioned earlier? They’ll come into force before we know it. So the sooner preparations are in place to cushion the blow, the better. And those are just some of the general extra expenses on the horizon. Depending on the nature and circumstances of your business, a lot more might be heading your way. The good news is that many, including some surprising ones, can be deflected, offset, or dramatically reduced. Just recently, we helped a client make the financial decisions that enabled them to slash an upcoming tax bill of around £70,000 down to just £5K.
Investment charges, compound interest, price rises, operational costs and contract renegotiation are also areas where screws can often be tightened; more juice can often be squeezed. And can you do things more quickly? Because if, for instance, you can lower metrics like your Days Sales Outstanding (DSO), you’ll get your revenue streams flowing faster.
Trusted advice
Could you benefit from the counsel of a trusted accountant who can help you navigate the financial challenges of Q1? Let’s have a conversation.
Check out the rest of our blogs periodically to get the very latest insight and information from the Business Control team.
