With 46% of CFOs expecting operating costs to rise “significantly” this year, growth companies should look to digital funding solutions to ensure leaner, more flexible finances, argues Freddie Digby, CCO of Adsum. 

During these turbulent times, businesses across the country are searching for ways to help them save money and secure cashflow. As businesses emerged from the pandemic, 2022 has greeted us with 30-year-high inflation and a volatile geopolitical landscape, reviving recession discussions amongst business leaders. 

The latest forecasts offer grim reading for UK businesses having just navigated the financial pressures of the global pandemic: 

• GDP growth expected to more than halve this year, before slowing further in 2023
• A sharper deterioration in the external environment coupled with a stronger fall in consumer spending could see the UK economy enter a mild recession next year
• Latest developments could see the Bank of England adopt a more gradual uplift in interest rates than is currently priced in by the markets, with two further rises expected this year

With this outlook in mind, should more CFOs begin to embrace a deeper digitalisation transformation – similar to what we saw during the pandemic? Businesses from pre-profit start-ups to multinationals will all be looking to technology to secure cashflow and better protect themselves from the current climate. Here are some of the key areas CFOs should look at to help secure their business’ financial future:

• Automating credit control

Late payments are a plague in almost every industry. Throughout the pandemic, due to government measures to protect struggling firms from insolvency, this reached record highs. Although figures have fallen, late payment is still a major headache for businesses – especially those that are smaller or with ‘lumpy’ cash flow. 

Businesses can automate processes – there is a variety of software available that automatically sends and resends invoices, chases late payers, and calls in professional help to pursue those still resisting paying should debt collectors be needed. 

• Look to the cloud 

This can mean different things to different people – and it is undoubtedly a broad recommendation, but if the pandemic has taught us anything, it’s that there is value in lean, flexible operations. Adopting the cloud, and cloud-based IT services and tools, can reduce overhead costs, increase flexibility for growing, and create new and more accessible opportunities for those adopting new digital tools. 

Cloud-enabled businesses generally have fewer IT headaches, lower overhead costs, and find it far-easier to add and remove money-saving Software-as-a-Service products to their operations. 

• Rethinking finance 

With traditional lending at an all-time low, according to Bank of England and FSB data, scaling businesses should look to alternative financing methods to fund their growth when faced with a less-than-ideal economic landscape. Those in the UK have a unique opportunity to do this thanks to the Government’s Making Tax Digital initiative and the raft of tax credit incentives available.  

An innovative company with annual expenditure of £6m typically receives £1.2m in VAT refunds over the year, with further tax credit payments of up to £1.5m plus additional grants in specific industries such as animation, film, TV, and video game industries.

Historically, businesses had to wait until the end of their tax year to receive tax credits and up to three months for VAT refunds. For companies rapidly scaling, this delay resulted in additional empty dilution of cashflow problems, especially when you often don’t know exactly how much you are due, to get paid. This issue has been worsened by HMRC’s understaffing and delays.  

Reclaiming tax credits can take months of waiting for businesses to get the money they are owed. In the current climate, speed is certainly of the essence when it comes to cashflow. Today, businesses have the solutions on-hand provided by alt-finance and fintechs who can recover tax credits in as little as 24 hours. For a small fee, businesses are now able to able to secure their cashflow overnight at a time when they need it most.