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Preparing Your SME for Change: Financial Implications of the Upcoming General Election

Posted by Todd Davison on Jun 12, 2024 12:30:00 PM

As we approach the general election on July 4th, businesses, especially SMEs, need to prepare for potential economic instability caused by wavering confidence in the business landscape.


The prospect of a new governing party and changes in policies can have a significant impact on market stability due to uncertainty about long-term strategies and investments.


As we saw in the last general election in 2019, political events directly correlate to a business’s trajectory. The Conservative party won by a significant majority, in part due to its focus on its approach to Brexit, using the campaign message ‘Get Brexit Done’. This direction affected how businesses approached critical aspects of their operations, as Brexit impacted trade rules and customs procedures.


In this blog, we’ll explore the strategies SMEs can implement to prepare for potential financial changes and how comprehensive insurance coverage is invaluable for safeguarding assets in uncertain times.


Preparing your SME for financial changes


While the prospect of this potential instability can be daunting, there are measures SMEs can take to prepare and protect themselves.


Assess your financial health


Before you can adequately prepare for the impact of potential government policy changes, it helps to have a clear understanding of your company’s financial standing. Financial audits are essential for gaining business transparency, especially when planning for the future.

Conducting a financial audit provides valuable insights into your financial position and helps identify areas of your operation that require adjustment, allowing you to mitigate risks and avoid potential errors.


Create a flexible financial plan


Creating a financial plan is an invaluable measure for future-proofing your business during times of uncertainty.


While you can’t predict the outcome of the general election, you can adjust your financial plan to ensure your SME can adapt to fluctuations in the market and significant shifts in your industry landscape. By implementing strategies such as building an emergency fund to help you weather potential financial strains and diversifying your investment portfolio to mitigate risk, you can effectively manage the instability of the upcoming election.


Managing cash flow


Effective cash flow management is crucial in preparing for periods of business instability. Liquidity management strategies ensure businesses have enough cash to meet their financial obligations. These strategies include:


Cash flow forecasting - predicting future cash inflows and outflows to plan ahead.


Maintaining cash reserves - forming an emergency fund to act as a buffer during periods of financial strain.


Reducing unnecessary costs – cutting non-essential expenses to conserve cash flow


Accessing credit – establishing lines of credit for seamless access to funding if needed.  


Diversifying income streams


As the market reacts to changing government policies, you can never know which avenue of your business may be affected.


The key to avoiding a significant negative impact is to ensure you have multiple sources of income to reduce your reliance on a single revenue stream. Diversifying your income stream helps you maintain crucial cash flow, even at times when particular segments of your business are at risk.


How PGI helps mitigate risks during uncertain times


For SMEs with business growth goals, the upcoming election should not mean that your plans for progress come to a grinding halt.


However, the instability caused by policy changes and market fluctuations can create immense risk for businesses that have acquired essential assets through business loans, affecting interest rates and funding approval. This is even more so for SMEs that have secured loans through personal guarantees.


Personal guarantees place business owners and directors at higher risk, making them personally liable for their company’s financial obligations. If the business defaults, creditors can claim any assets used to secure the personal guarantee, including property, savings, and possessions, to repay the debt.


The key to reducing the risk of a personal guarantee is through comprehensive insurance coverage.


Personal guarantee insurance (PGI) is a policy designed to provide a safety net to business owners and directors, covering up to 80% of the value of the assets used to secure business finances.


One of the most significant advantages of PGI is that it can be applied to both new and existing personal guarantees, allowing you to prepare in advance for any economic instability caused by the general election.


Safeguard your assets from economic instability with Purbeck


Purbeck are the UK’s leading provider of PGI coverage. Our policies are designed to support SMEs during uncertain economic periods such as election times.


With PGI in place in 2024, investing in your business becomes far less of a gamble. Plan for business growth with confidence, knowing your assets are safe from the effects of the general election.  


If you have any questions about our services or would like to learn more about PGI policies available from Purbeck, don’t hesitate to contact a member of our team today.

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