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Could an economic recovery be bad for your business?

By 17th June 2014No Comments

Lee Freeman

Posted by: Lee Freeman

So can an economic recovery really be bad for your business?  Surely not. The truth however is slightly different, even the Institute of Director’s last week recognised the dangers.  Given we now appear to be in a period of sustained growth, with growth of 0.8% in Q1 2014 following on the back of 0.7% growth in the last quarter of 2013, how can this be bad for business?  Surely all firms should be thinking of bulging order books, increasing the work force and looking forward to profit growth after a lean time over the last 5 years.

Well that in itself is part of the problem.  People have very short memories and the lessons of the last 5 years can be quickly forgotten.  As a director of a business do the first green shoots of a recovery have you reaching for the growth button irrespective of the state your business is in.  A lot of companies may take the view that having survived the last 5 years they can now take advantage of the opportunities that a growing economy offers.  They believe that if they have survived the last 5 years they can cope with anything the business world can throw at them.

It is a fact that one of the surprises of the recession of the last 5 years was the lower than expected increase in unemployment and the lower than expected number of company failures over the same period.  History has shown us however, certainly in the recessions in the 1980’s and 1990’s, that more companies fail coming out of a recession than going into it.  I have had first-hand experience of this having spent some 5 years working in the corporate recovery division of Grant Thornton during the 90’s recession, but why does this happen.

In essence the answer is overtrading, increase in orders mean purchases of raw materials increase which, if your business offers credit, may mean the business suffers cash flow problems.  So what can Auditel do to help you?  Book a consultation so that you can be sure that all your business overheads are not costing you additional money, particularly when cash flow may be tight anyway.  We can help free up cash that you are already spending in your business and help divert it to the place where it is most needed, rather than wasting it.  A client I visited last week loved the level of savings I identified, some £13k on spend of about £60k, but it was what it would mean to the business that was more important.  He had identified stock control as an issue for the business, and the savings I have identified will go towards recruiting that additional stock man and paying their salary, so helping the business grow further.

Please don’t waste all the good work of the last 5 years and stop reviewing your business costs.  If the increased level of activity means you don’t have the resource to undertake the review, outsource this work, let Auditel become your outsourced procurement department.  It is more than that however, let Auditel help accelerate the growth of your business and take advantage of the opportunities that exist without putting the whole business at risk.