Frantically paddling against fast water or going with the tide? - Looking back on 2022Posted: Jan 5, 2023

A year of financial white water

2022 started with a lot of hope, didn’t it? By the end of January Covid looked as if it was finally on the back foot, the work from home restrictions were lifted and business felt as if it was all ramping up again. That said, we were still being a little cautious about the future and in our blog looking at the coming year we talked about the need to be prepared for changes:

Whether that is in credit control, changing your pricing, altering your terms or whatever you need to do to adapt to the new normal. To quote Darwin, “It is not the strongest of the species that survives... It is the one most adaptable to change”.

Looking back at 2022 that now seems to be an understatement. What a wild ride it has been over the last 12 months. It seems strange now to look back and realise that a year that began with the extreme circumstances of a work from home order became even more unsettled. 

As much as I would love to look back over 2022 with rose tinted glasses, it is difficult to do so. That said before we do look back let’s take a moment of optimism. At the time of writing inflation is falling and the expected recession seems as if it will be shallower than predicted. And, despite the potential for sharper rises, the Bank of England base rate is still well below where it has been in the relatively recent past.

What we expected last year and what we did about it.

One of the big goals we had this last year was to make Smart Business Recovery more than just another insolvency company. We wanted to be a source of information and clear guidance because we felt there were difficult times ahead. When things are tough financially, you need the right information quickly. In response, we created new sections of our site specifically to help company directors understand where they were financially and what they needed to do. Coming out of the pandemic meant the protections for business were being removed and we wanted to help.

High insolvency levels seemed inevitable. When you take a quick look back through our blog articles for the year you can clearly see the pattern developing.

In early 2021 some of our concerns were:

• HMRC would be more aggressive in collections
• Other creditors that had taken a soft approach during the pandemic would also be looking to collect
• BBLs would go from blessing to burden for many businesses particularly if they were slower to recover from the pandemic than expected
• Payment terms and other supplier and customer issues could become a problem

We suggested that one key tactic was going to be to work with your suppliers, customers, and creditors wherever possible to keep the money flowing. As we always say, cash is king, so we were focused on advising people to work on their cashflow to keep things stable.

Then, by the end of March, the unthinkable had happened and we were a month into a continuing land war in Ukraine. Fuel prices began to rise and this, as well as supply issues and rising inflation, began to impact almost all industries. Creditors and HMRC were both becoming more aggressive in chasing debt and the burden of Bounce Back Loans was a regular subject of meetings with our clients.

By June the rising utilities and transport costs were big on the agenda and we were talking about practical solutions to the problem. It was very concerning that in the high summer and the blazing sun of the heatwave, businesses were already asking for help with insolvency due to the cost of utilities. The fear of the cost of heating for the winter months was well justified in many sectors.

The shenanigans with revolving door Chancellors and Prime Ministers in the middle of all this are probably best left unmentioned.

It is sad and rather telling that the subject of our blogs by the end of the year was advice on how to get the right insolvency practitioner, the financial problems faced by Rugby giants, Wasps and changes to the way HMRC were pursuing tax related to directors’ loan accounts.

So, what about 2023 - Will it be better?

Well, the good news is that things could be a lot worse. I know that sounds like damning with faint praise, but during a difficult financial situation, anything that is better than expected is a real boon. OK, yes there have been better times and it is probably true that we are not going to see much improvement in the coming year, however, let’s get some perspective. The pound seems to have stabilised for the moment making supply chain pricing a little more stable. The Government have taken some action on fuel costs and may well do so again. The BoE base rate may well currently be at 3.5% and likely to go up again but let’s remember that it was hovering around 6% in 2008 and 14% in the 90s. The point is that one of the biggest influences on business costs is still relatively low. At the time of writing, fuel costs for transport are starting to fall a little as well.

The predictions vary but the general feeling in financial circles is that things will dip a little more before steadying out and then picking up later in the year. While this may not be a reason to cheer it is a good reason to have a little optimism about things improving. 

As we say in the title, there were a lot of financial white-water rapids to negotiate last year and businesses needed to be flexible to make it through them unscathed. Hopefully, 2023 will be less volatile. For some though, no matter how hard they paddled in those choppy waters, the economic situation was just too overwhelming. That is going to continue for some time to come so our advice is to look to ride the financial rapids - but be realistic about when you can’t. 

If things are not going to work out for your business, call us or book in for an initial free consultation. We are here to help you get to the right solution.