THE start of a new year always brings fresh plans for business growth.

But to capitalise on new opportunities, and to mitigate the impact of any unexpected drops in trading, companies need to have flexibility in their finances – especially during times of change.

The volatility of overseas trading conditions in 2019 is a perfect example. For instance, recent US trade tariffs, imposed on everything from English wine to renewable energy products from the North-East, are already challenging some UK exporters. Whether the scope of US tariffs extends in 2020 is, at this stage, unclear.

Uncertainty also continued to affect business confidence in 2019. Some firms are hopeful for a period of greater political and economic clarity in 2020, potentially boosting consumer confidence and creating new opportunities for investment.

Meanwhile, external factors from the knock-on effects of regulatory changes to fluctuations in demand caused by inclement weather can be challenging.

Like the weather, accurately forecasting what the new year will bring and how it will affect a firm’s finances can be difficult, but effectively managing the amount of money tied up in the day-to-day costs of running a business – working capital – forms an effective part of dealing with whatever lies ahead.

When planning for the year ahead, it is vital North-East businesses understand the importance of a strong working capital position. By effectively managing working capital, firms can ensure they have the liquidity to invest in new opportunities and account for drops in trading caused by unexpected shifts in market conditions at short notice.

In the day-to-day, this means ensuring the cycle between cash leaving and re-entering a business is as efficient as possible. To do this, it is essential to maintain correct and timely information and reporting processes to analyse suppliers, payables, debtors and collection processes.

A cashflow forecast, for example, is a useful and simple-to-implement tool. This can let firms lay out when they expect to be paid before starting a project and how long the business can afford to wait before receiving cash. Fixed seasonal milestones – be that Christmas, Easter or the food and drink festivals that take place across the North-East during the summer – can be built into this plan too.

For any plan to improve working capital to be a success, an organisation must be fully committed to it across all departments. Otherwise, any programme of change will struggle to get off the ground.

An action plan that everybody is bought into, one with a clear framework of governance, objectives and targets set, will help increase focus and ensure positive changes can be sustained long-term.

Payment terms – in and out of the business – are one example area that businesses could focus on to improve working capital. Even if you cannot shorten a customers’ payment terms, speaking to them and agreeing clear processes, ahead of signing new contracts, can have a significant positive impact.

This way, a business can establish what information a customer needs to process invoices and whether any predictable issues such as bank holidays might delay payments.

There are also financial solutions available to help businesses take advantage of sudden spikes or lulls in demand. Invoice finance, for example, allows companies to access up to 90 per cent of the value of an invoice within 24 hours of it being issued.

Steps like these can ease the pressure around predictable working capital pinch points, giving businesses more liquidity to respond to those unexpected challenges or opportunities.

While it’s impossible to predict the future, it’s not impossible to be best prepared for it. Combining an awareness of potential pressures on the horizon with simple operational and financial measures can help firms better manage their working capital and thrive in the year ahead, whatever the business conditions.