Taking the next financial steps

No one has a crystal ball, and no one could have truly predicted where we – as individuals and as businesses – would be nearly two and a half years after the COVID-19 pandemic. It’s been an incredibly turbulent time and we’ve all had to learn to embrace change; agility has become a business’s best friend.

While it would have been ideal to sit here today and say that we all could, once again, thrive in a stable economy, but this may have been a little optimistic. After a storm, there is usually rain, and we’re now having to navigate our way once more through thundery showers. The pandemic, Brexit and the war in Ukraine have all collided and volcanically erupted, wreaking havoc for the UK’s – and the rest of the world’s – economy. From sky-rocketing food and fuel prices to unmanageable staff shortages, a cost-of-living crisis and possible double-figure inflation rates; this element of uncertainty matches that of March 2020, when the world was thrown into chaos almost overnight.

However, on a more positive note, what we have now that we most certainly didn’t have two years ago, is the knowledge garnered from hindsight.

This ability to look back over the past two years and draw learnings from the worst and the best times, will give businesses and individuals have a far greater capability to be in control during the next phase of the country’s recovery from COVID-19. Here are three aspects of your finances to consider in the coming months in order to ride the next wave of economic turbulence.

Cash is king
The best solution to the current financial squeeze is having a clear understanding of your finances. Having good cashflow at this time will be integral to ensure you don’t run yourself into any unnecessary debt, as well as to have clear insight into what you might need to tweak and adjust in your spending to ensure your future projections stay in the green.

Of course, it won’t be enough to simply check your future projections once and assume that will be that. Projections, even in positive economic times, are living things that fluctuate regularly. Ensure you are exploring and adjusting your forecasts regularly; monitoring them daily is advisable, as is reprojecting monthly.

Think of your cash projections like a plant. If you don’t nurture a plant, it will begin to wilt – even in the most optimum of conditions. Nurture your plant and it will thrive.

Be wary of wage inflation
With the cost of living firmly rooted as one of the biggest worries facing both businesses and individuals in the current economic market, and a recent inflation increase to 9.1% - the highest we’ve seen in 40 years – employers and employees are going to be looking at ways in which they can support themselves in this financially turbulent time.

Individuals especially are going to be looking to their employers for financial support, with many perhaps asking for a pay increase in line with inflation. But in such a volatile economic climate this must be handled with care. A wage spiral could prolong inflation for too long, while not enough of a wage increase for workers will leave many in the most difficult financial position since Margaret Thatcher. It’s a balancing act.

Employers and employees must explore alternative routes as well as wage increases to help combat the current cost-of-living crisis. From one-off bonus schemes to tax-free support, like childcare vouchers; from fuel allowance support to the introduction of staff canteens in the office – there are numerous ways in which businesses and individuals can be supported over the coming months.

Focus on staff retention
A point aimed at businesses, but one that will affect everyone. Staff shortages are rife and plugging skills gaps and battling against the tide of extremely overworked employees is a problematic pain point for so many businesses in the current market.

While it may sound like an obvious solution, its integral – now more than ever - that employers work hard at retaining their staff. The average hire costs a business anywhere upwards of £3,000 and in such a candidate short market, this is likely to be a lot more.

Your people are your best asset, and they will be the reason your business gets through the next phase of recovery. Listen generously to what they want and need and work out compromises along the way. While salary will always be a key element of what individuals need, so will practical benefits, a meaningful culture, and an employer that cares.

No-one truly knows what is coming next for the UK – or the rest of the world – but, taking an educated guess, we’re not out of the woods yet. There is likely to be another inflation rise once again, potentially pushing us up into double figures. The cost-of-living crisis will take its time to even out, and the business landscape will remain unsteady at least until the end of the year. The best thing anyone can do during this time is focus on what they can control, rather than panicking about what they can’t.

We know that the next few months are going to a worrisome time for some, if not most. If you ever need support or just a shoulder to lean on, at Monahans our doors are always open.

Simon Tombs