Great Financial Ideas Newsletter - November 2012

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I was pleased to read recently that the UK economy raced out of recession, growing 1% in the three months to September.

The generally accepted definition of a recession is two consecutive quarters of contraction, so the growth in the third quarter means the economy stopped being in recession in July.

Although the Prime Minister is rumoured to have banned the words ‘green shoots’ and government has added caveats galore to the good news citing the ‘one off’ benefit of the Olympics, I can’t help but think it feels good to be able to talk up the economy for a change. The constant negative doom and gloom carries with it the risk of becoming a self-fulfilling prophesy. There’s probably one sure way for us to fall back into recession next quarter and that’s for consumers and investors to lose faith and sit on their money.

That said, I can’t think many small business owners will be resting on their laurels any time soon. There is the distinct possibility this good news was a blip in an otherwise stagnant economy and so it would be overly optimistic to sit back now and think we’ve reached a turning point.

This quarter’s figures show some winners (along with losers). In particular retailers and construction companies are having a difficult time still but exporters of manufactured goods and services are doing really well. And so perhaps a little cautious optimism is appropriate.

Find a successful business and you are likely to see an ability to adapt, diversify and make the most out of a difficult situation. You only have to look at the recent significant increase in on-line commerce to see that in practice.

In the foreseeable future, above all business owners need to continue to run their companies leanly, maximising savings, minimising waste and having a clear plan and key performance indicators to keep the ship not only afloat but successfully on course through likely choppy economic waters ahead.

For this, information is key. Business these days is hard enough without being at an unnecessary disadvantage through lack of relevant management information to inform your decisions. Understanding your current profitability and future cash flow is crucial for informed decision making. Regular monthly or quarterly information puts you in control of your finances. Having the right management information will make it easier for you to make difficult decisions and monitor results.

Andy Parker
Chartered Accountant, Birmingham

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Andy Parker
Parker Chartered Accountants + Financial Advisors

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