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Podcast: Keeping on top of current financial risks

All kinds of financial pressures are building up on UK businesses right now, so what's the best way to navigate through such difficult times?

Surging inflation, energy crisis, supply chain issues and that's just the tip of the iceberg. UK businesses are facing all kinds of financial risks and challenges right now. Our guest for this podcast episode is Hannah Justice, a director at BSN Associates, a team of Chartered Accountants, which helps small and medium sized businesses with their financial and strategic decisions. Hannah offers insight around current financial risks and tells us the one thing businesses do not want to get wrong right now. Listen in...

If you would prefer to read rather than listen to this episode, please see our transcript below.

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Johnny Thomson  00:02

All kinds of financial pressures are building up on UK businesses right now, so what's the best way to navigate through such difficult times? Hello everyone and welcome to the RiskACUMEN Podcast, which offers thoughtful insight around risk management. Surging inflation, energy crisis, supply chain issues and that's just the tip of the iceberg. UK businesses are facing all kinds of financial risks and challenges right now. So I'm delighted to be joined by Hannah Justice, a director at BSN Associates, which is a team of Chartered Accountants helping small and medium sized businesses with their financial and strategic decisions. Hi Hannah, thank you so much for coming on the RiskACUMEN podcast today.


Hannah Justice  00:52

Hi Johnny, you're welcome.


Johnny Thomson  00:54

Great. Thanks for coming on as I said, Now, before we start looking into all of the doom and gloom, fill me in a little bit on your background and experience Hannah and also the approach that your business takes to helping clients?


Hannah Justice  01:12

Yes, so I started to qualify, train as an accountant back when I was 19. So I've been doing it now for over 20 years.


Johnny Thomson  01:21

Giving your age away there.


Hannah Justice  01:22

Not quite over 20 years. Yeah, so I'm qualified through the ACCA, which is the Certified Chartered Accountants qualification. And then I did the pathways qualification to the Institute of Chartered Accountants for England and Wales, when I became a director and shareholder at BSN just over 10 years ago now. And basically at BSN what we actually stand for is balanced, sustainable and nurturing. And with that, we like to give our clients balanced advice. So it might not always be advice that they necessarily like, but we give them our view, our viewpoint on what that is. And I think most of them genuinely appreciate that. And we like to work with, help businesses be sustainable and nurture them through their journey. So our motto is kind of that we are with businesses every step of the way. So we will literally work with clients from when they've been a startup, not knowing what to do, getting them set up, holding their hand all the way through that process with them right up until when they potentially come to sell the business. So we'll work with them along the way, offering them different kinds of services from annual accounts through to doing payroll, book-keeping, giving them internal information that they need to help them run their businesses, monthly or quarterly. And as they get bigger, help them raise finance and with potentially doing acquisitions of other businesses along the way. Fantastic. And yeah, balanced advice, I guess not always hearing what you want to hear is rather where we're at, as I said earlier doom and gloom, financially there is unfortunately plenty around right now, isn't there? And give me a sense of how we've got into this situation Hannah? And what exactly are the pressures now been faced by businesses? I think the main... well, there's a lot of pressures being faced by businesses, the main one is inflation, which is being driven by a combination of material shortages. For most businesses there's a shortage in the labour market as well. We've had the issue with energy fuel costs brought on by the war in Ukraine earlier this year, but also the material shortages and labour shortages are really a falling out, I think from COVID. Due predominantly to a lot of people I think in their 50s, who decided that they no longer wanted or needed to work. So they've retired early. And that's led to a shortage of certain skilled staff out there and that was probably compounded as well by Brexit. People obviously leaving and going back to to live in Europe. And also during COVID with the shutdown, the material, we weren't producing as much for a period of time and that has actually had quite a knock on effect. And we just haven't we just don't seem to have been able to catch back up from that.


Johnny Thomson  04:36

Yeah, it's almost been a perfect storm hasn't it of certain things, which have which have triggered where we've found ourselves, and it's just brought a whole range of things, hasn't it?


Hannah Justice  04:47

Yes, it has and unfortunately, businesses are just having to wade their way through it and fight and find their way way through it as best as I can. Because I don't think for long time, certainly businesses have had to deal with these kinds of issues, or certainly not all at once anyway.


Johnny Thomson  05:05

Is there any good news out there Hannah?


Hannah Justice  05:10

Well, I mean, normally, there's I mean, if you're a good strong business, I think the positive to take out of it is that normally businesses that are well run, that are strong going into something like this, you know, they will survive.They'll have a challenging few years, but they will get through it and survive. And I think the other, you know, the other positive to take out of that is that there are still there will still be opportunities out there for for businesses as well to take advantage of because unfortunately, there are some businesses that will obviously fall by the wayside as a result of all these challenges, which gives the businesses that remain the opportunity to pick up those sales or those companies to add to their business and growth. So there are equally you know, opportunities out there, so...


Johnny Thomson  06:04

Okay, so well we'll maybe explore some of those opportunities and make it not all negative.


Hannah Justice  06:11

A bit more positive.


Johnny Thomson  06:12

So we'll try and bring some positivity into this at some point. I mean, in essence we're in unknown territory here aren't we? I mean we've faced difficult times before, I'm sure people will think back to the crash during the 2000s, but this is this is unprecedented, really, isn't it, where we're at now?


Hannah Justice  06:33

Yes, it is. I've certainly never known anything like it. The financial crash was predominantly due to obviously the banks and that had a knock on that did have a knock on effect, but not the impact that it's having on businesses now in terms of the high inflation that we're experiencing and the price and the pricing pressures. It certainly didn't lead to all you know, it didn't lead to material and labour shortages. So to some extent, although businesses did have to deal with issues around that they were fairly minimal really, compared to what they're having to face now.


Johnny Thomson  07:12

How can businesses respond? What what are the kinds of choices that they face?


Hannah Justice  07:18

I think they need to look at their, I think all businesses need to look at their cost base and manage their cost. They also need to be, I think, aware that as they are getting these increases in costs, they do need to be looking at passing these increases on to their customers where they can, because I think generally their customers will be expecting it. I had a client a few weeks ago, where they had a supplier that wanted to be paid within two weeks of invoice., whereas terms were normally 30 to 60 days. And they said they need, you know, they needed to be paid quicker because of the increasing costs they were facing, but they weren't passing those prices on, which I thought well, I think that is part of their problem, because at some point they are actually going to have to pass those prices on otherwise they are actually going to you now have a quite a big problem, because they were actually a whole haulage company. So with the issues they're facing with fuel and labour, it would be very difficult for them not to pass those prices on. So I think businesses need to look at that and be sensible. It's also about with material shortages, it's looking at you know, options that are out there. Maybe trying to broaden your supplier base, if you can, to see what other options for materials are out there. Finding out what your supplier lead times are because I know I've had clients where before they could just phone at their supplier, and they'd get the materials by the end of the week. And now if they phone them up, they they'll be lucky if they get it within sort of six weeks. So it's trying to manage those things that allow you to keep your business running, so that you don't incur any unnecessary downtimes and costs in terms of energy and fuel. I think unfortunately, there's very little that businesses can do about that. There are fixed contracts out there. But unfortunately, you'll probably pay more than than the variable tariffs that you go on if your fixed contract comes comes to an end. So yes, I think it's just managing costs and being careful and managing working capital as well. Because as all businesses will come under pressure, there will be some businesses within every you know some customers who will be facing challenges and will be finding it potentially difficult to pay, so it's making sure you keep on top of your credit control as well and manage that to make sure that you are getting paid for the work that you do. Because as they say, cash is king. So it is just keeping on top of everything and managing everything where possible.


Johnny Thomson  10:09

Yeah. So it sounds like a case of accepting really, that we are in a crisis situation. Now is not the time to bury your head in the sand and pretend it's all going to go away!


Hannah Justice  10:20

It's not, it's not going to go away. I think we're going to be facing this for a while. I mean, at the moment it there just seems to be no stopping it. So this is something I think that businesses are going to have to learn to deal with and manage for I think the next six to 12 months at least. So you can't bury your head in the sand and think when you wake up tomorrow it'll all have gone away.


Johnny Thomson  10:46

Yeah. And it's a case of explored a range of strategies that suit your business and suit the particular market that you're in, yeah?


Hannah Justice  10:55

Yes it is, yeah. Because each business is unique and will have its own models. And it's just making sure that you're keeping on on top of that and working with your suppliers and customers to make sure that it all falls into line and your employees as well.


Johnny Thomson  11:10

Yeah. It's worth recognising as well, there's always winners and losers isn't there in in these situations? And it's a case of making sure that you don't fall on the wrong side of that. We talked about opportunities, as well, in all of this too. I'm thinking in terms of investment, for example. The cost of borrowing, for example, is still far lower than the rate of inflation isn't it, so it seems to be a clear and obvious opportunity in that perhaps?


Hannah Justice  11:40

If you've got the ability to invest in the opportunity, now is still a good time, because although interest rates are going up, they're obviously more than they were 12 months ago, they've obviously gone up by half a percent in the last week. It is still, the cost of borrowing is still fairly cheap. So if there are opportunities out there, or you need equipment for example, to expand your business or just to make it more more efficient, then to make those kinds of investments now, it's still fairly cheap, you know, cheap borrowing to be able to do. And there are, particularly if you're investing in new plants and equipment, there are favourable tax allowances out there for when for when you buy them. So the super-deduction allowance will actually give you 130% of your taxable against your taxable profits. So if you spend £100,000 pounds on a piece of equipment, in addition to getting the £100,000 allowance that you would under the annual investment allowance, you get an additional £30,000 against your taxable profits. So you make a tax saving of just under £6,000.


Johnny Thomson  12:55

Right? Yeah. And this is why it's always good to have a conversation with your accountant, yeah?


Hannah Justice  13:01

Yeah, because as silly as it sounds, that only applies to new plant and machinery, not secondhand plant and machinery. So depending on the cost of the equipment, that could sway somebody to actually buy a new piece of plant and equipment rather than a secondhand piece. Because it's got the warranty, it's going to be more efficient, etc. But they know although it's still going to cost them more, it's not going to cost them as much as it initially appears on the piece of paper.


Johnny Thomson  13:30

Any any other kind of mechanisms like that Hannah, that you've been guiding your clients towards, that you can think of recently?


Hannah Justice  13:36

I think the other thing is just to see what grants are available, both the central government and with your local councils as well, because they do have grants to help with all kinds of different things. So there's grants there for energy efficiencies, if you want to do things in your building quite often to make things more efficient. So using, having lights changed, building made more heat effective. And also they will have grants as well to generate growth within the area. So they'll often be grants that are combined with sort of capital investment and also by job generation as well. So it's if you are looking at investing, you're seeing what is available there that can help you so it doesn't, it's not as costly to the business.


Johnny Thomson  14:27

I guess now is probably a good time as well for some to look at overall business strategy, particularly around digital and perhaps being a bit more disruptive in their market, because to be that winner or to control those costs you have to think a little more radically now don't you?


Hannah Justice  14:46

Yes, you do. And particularly for businesses that have been around for a long time and maybe set in their ways and like doing things in a certain way, it is worth looking at seeing what processes you do, as to whether you can make it more efficient, or how that impacts on your costs. So at BSN now we're trying, we've got a big drive on going paperless or as paperless as we can be, just because that's more efficient from our point of view, because everything's on the server on our server, because we're cloud based. So we can access any information that we need wherever we are in the world. But also, it means that we save on printing costs, stationery costs, and even as silly as it sounds, sort of postage costs, if we're sending things electronically for signature, which was one of the things we brought in the other year. So it is a case of, I think of businesses looking at their processes, seeing what generates some of those costs and seeing if there's more a more efficient and also a more modern way of doing it, which probably makes you stand out a bit more maybe from your competition as well.


Johnny Thomson  15:57

Yeah and going in going into those small costs, sometimes people think well what difference is that going to make, but it's that old phrase isn't it of looking after the pennies and the pounds will look after themselves.


Hannah Justice  16:07

And sometimes by bringing in those efficiencies as well, it can save the person who's doing that task, it can save them time. So then you don't actually, when as your business grows, you don't actually need to take on an additional person as quickly. So you haven't got the increase in cost maybe as soon as you'd initially think as well.


Johnny Thomson  16:28

Okay, so what about the medium to long term here? Have we really got any idea where we're heading Hannah?


Hannah Justice  16:34

I think certainly in the short term, by the end of the year, I'd be surprised if we weren't in a recession. I think that will stay around. I think in the medium term, we will start to come out of it at some point. With recessions as businesses unfortunately start to drop by the wayside, you also tend to have redundancy as well, of staff unfortunately. The consequence probably of that is that it will sort out some of the labour shortages that we see that we're seeing in the market. And gradually with the higher inflation at some point spending, I mean a lot of what's fueling inflation is energy, which we don't have any control over because we all need electricity and gas to power our house, so you know, we have we in a way are forced to spend on that. But I think in terms of other inflation, people will start to cut back, businesses will look at what they're spending. And gradually, as that starts to come fall more into line, then things will hopefully start to get back to a more normal footing.


Johnny Thomson  17:42

Because that's the interesting thing about economics, and so on isn't it, it's just generally corrective action that we're seeing, as you suggest so that what will happen here is, as I mentioned, before, you get winners and losers, you don't want to be on the losing side. But ultimately, there'll be fewer businesses around and then there should naturally emerge from that a growing market. Things will go round in a circle. And as long as you've ridden the storm, then there should be plenty there for you to take advantage of later on down the line, yeah?


Hannah Justice  18:15

Yeah, we're kind of if you've got a graph, if you've got a graph, normally, you'd like the line to say fairly sort of stable along it. And the line's got a bit out of control at the moment. So we've got to go through a process of getting it back to a more stable stable footing, which is what the Bank of England are trying to do by increasing interest rates.


Johnny Thomson  18:38

Yeah. Okay. That's great Hannah. And I hope that's been a little bit helpful for people listening in to understand, you know, some of the financial risks and pressures SMEs in particular are facing right now. I'm interested to know if there's one thing you really don't want to get wrong as a business right now, in your opinion, what would what would that be?


Hannah Justice  19:00

One thing, I would probably say the one, the one thing not to get wrong is the working capital side of your business. Remember that you know, that cash is king and keep on top of your debtors, your credit, credit, you know, doing your credit control, and managing and managing your suppliers. And then I think as long as you're doing that, and you look into keeping an eye on the other things within your business, making sure that you can increase prices where you can to cover those costs, then most businesses will, you know, will will see through this difficult period.


Johnny Thomson  19:42

So it really is what you're saying is just make sure that you have the have the funds, have the assets have the resources that will that will see you through this.


Hannah Justice  19:53

Yeah. Yeah. And what what we're starting to see is we're having more clients coming to us because they want more regular information. So if we currently just do their accounts on an annual basis, they might be asking us to do them quarterly or six monthly just so they can see where, where they are and understand what's happening in the business. And we're helping them with that. So what I'd say to people is, you know, if you haven't got that kind of level of financing, a lot of businesses don't, they'll have very good finance people who can do the day to day transactions, but not necessarily give them that information, then speak to your accountant to see what advice they can give you or help they can give you so that you are getting that information that you need during this period.


Johnny Thomson  20:40

Yeah. Excellent. A great, great piece of guidance to leave everyone with I think Hannah. Many thanks for your insight. Interesting times, isn't it? And it'll be fascinating to see where things actually move to from here.


Hannah Justice  20:54

Yes, it will, it will be. It'll be very interesting. The only other thing that I thought of as well just which businesses might find helpful is just seeing as well, especially with the labour shortages, what apprenticeships are out there for the industries that they're in, because you can get assistance with that person's training. And obviously, with the shortage in labour, shortage of skilled workforces, it's potentially a way for businesses to develop that skilled workforce. You don't get it straight away, but you do get the benefit of it potentially, you know, in a couple of years time when that person's pass that pass their apprenticeship. I mean, you always have to pay them a salary, etc. But their training and everything you can normally get paid for through through the apprenticeship programme at a fairly minimal cost. But that might be another option for some some businesses to look at if they haven't already looked at that route.


Johnny Thomson  21:49

Yeah. And that's all related back again, isn't it to that making sure you have the resources at your disposal? Okay, well, yeah, as I said hannah, thank you very much for the insight and it's been great chatting with you.


Hannah Justice  22:02

No, that's fine. Thank you, Johnny.


Johnny Thomson  22:05

And that's all we have time for for this episode of the RiskACUMEN podcast. If you have any questions or comments around a topic Hannah and I have been covering today or any of our other risk related content, please head to our LinkedIn page. You can find a link at Thanks for listening and everyone. And until next time, goodbye for now.



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