The coronavirus pandemic has taken a heavy toll on numerous businesses, particularly those in the beleaguered leisure and hospitality sectors.
Recently, yet another Glasgow hotel in the centre of the city (operating as Pocotel) fell into administration, with the 91-room venue having struggled to maintain its operating cash flow after years of interrupted trading.
Certainly, businesses can find it hard to deal with the stress created during a financial crisis. But what steps can they take to overcome this? Here are some ideas to keep in mind:
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How Are Businesses Being Impacted by the Macroeconomic Climate
While the cessation of lockdowns and social distancing measures have provided a boost to the business community (particularly travel, leisure and hospitality brands), the macroeconomic climate remains precariously balanced as economies look to recover.
Since the second half of 2021, for example, inflation has spiralled out of control in the UK, reaching a 30-year high of 6.2% in February before peaking at 7% during the following month.
This issue has emerged as a direct response to increased public borrowing and wider quantitative easing measures, which were rolled out to help combat the economic impact of Covid-19.
At the same time, the Central Bank has now started to tackle rampant inflation by hiking the base interest rate, having increased this from 0.1% to 0.75% in just four months between December 2021 and March.
While this should achieve its aim in the medium-term, it will create initial challenges for businesses, who will see the cost of borrowing rise while soaring inflation continues to impact demand and household spending.
How to Cope with the Stress of a Financial Crisis
The question that remains, of course, it what steps can you take to cope with the stress caused during this type of financial crisis? Here are some practical ideas to help you on your way.
- #1. Develop a Clear Understanding of Your Circumstances: Accurate budgeting is crucial during times of financial and economic crisis, as this affords you a genuine insight into your unique circumstances and enables you to make more informed decisions going forward. Another proactive measure is to consider carrying out an internal financial audit, which can identify issues with your reporting processes and potentially highly frivolous or uncontrolled expenses.
- #2. Try to Reduce Costs: Some businesses can respond to a financial crisis by hiking their prices, but this is not always viable in instances where inflation is high. What’s more, it means little unless you’re able to adequately control costs, as you need to keep a close eye on profit as opposed to turnover at all times. More specifically, you’ll have to try and reduce or minimise operational costs during uncertain times, primarily targeting non-strategic costs where possible.
- #3. Look at Your Workforce: This is another key consideration, as maintaining a large core of permanent employees can command a huge share of your budget and lead to higher than necessary costs over time. So, you may want to create a more agile workforce that adapts to your real-time demand, perhaps by employing creative freelancers on short-term contracts to work on specific projects.