Posts tagged ‘Recession’

Now, I’m not particularly interested in politics, but the state of the economy and the property market is something that I just can not ignore.

Is it just me, or does George Osbourne’s grasp of economics worry you too?

In this Telegraph article  he is quoted as saying that 95% mortgages are not “weapons of mass destruction” despite warnings from RICS that they could create another housing bubble and he believes that large home loans are part of a “healthy market” and “aspiration society.”

Real Estate=Big MoneyHow does he think the 2007/8 crash happened?

When Maggie gave us the opportunity to be home owners, do you think she envisaged British people being up to their eyeballs in debt?

Simple?

There are two very obvious problems with big mortgages

  1. If you stretch yourself to the maximum to afford a loan at a time when interest rates are at historically low levels what do you do when interest rates rise, as rise they must, sooner or later?
  2.  What do you do when the house in which you have 5% equity drops in value by 10%?

The answer in each case is default on the loan and hand the keys back, and we all know who will end up paying the costs of these bad bank debts!

Responsibility?

So who should take responsibility for promoting  this “so what” attitude to debt?

The first time buyers who are being allowed to take on such a huge financial burden?  The lenders? The Government?

Personally

Frankly as the owner of several buy-to-let properties I am revelling in the shortage of properties caused by the recession, profiting from the low interest rates and the chance of another “bubble” is very exciting!

But I am sure I am in the minority with this rather selfish outlook.  What’s your view?  Has the Chancellor got it all wrong? Will his strategy help the country to recover from its economic crisis?

 

The information provided in this blog illustrates my opinions and experiences, it does not constitute advice and I do not accept responsibility for any actions taken or refrained from as a result of reading this post.

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On Wednesday 24th March the Chancellor, Alistair Darling gave what could be his last budget. Many are saying how the budget was a waste of time, being so close to an election and the lack of assistance to small businesses or real attempt to recover from the significant budget deficit certainly supports this view.

Businesses however, should consider reviewing their own budgets and make sure they are set appropriately. As someone a lot wiser than me once said ‘failing to plan is planning to fail’.  Just as sinful is spending time creating a business plan and annual budget and not reviewing, updating or revising them on a regular basis.

Budgets are an important tool for anyone in business and at least an annual review should be considered. Many businesses approach their accounting year end at this time of year so it is an ideal time to appraise how your business is doing and what you wish it to achieve in the future.

Here are a few tips to consider when reviewing your budgets for the year:-

  • Are you producing management accounts on a regular basis, if not, what financial information can you easily extract from your accounting system that would help you monitor the business?
  • Business forecasts and cash flow projections should be prepared for a minimum of twelve months giving you something to monitor performance against;
  • You should ensure budgets are realistic in the current climate,
  • Are there any costs that can be trimmed back? Do you know which of your costs are fixed and which are variable, in reality in the short term most costs are fixed, if you need to go through a cost cutting exercise you need to know which costs can be varied and when.
  • Is cash flow behaving as expected? Are you likely to need further banking facilities at some point in the future?  Are your debtors and creditors being managed appropriately?
  • If you are selling a product, it is important to know at what point the business is generating a profit, following the recession with pressure on prices the break even point can be higher than you realise, you need to be aware of this.
  • If you are selling a service, do you know how many of hours of time you are invoicing out a month, you may feel busy but is it resulting in billable income.
  • How are you generating new business, and what is this costing you in terms of time and resources.  Are you being realistic about how much new business can be won?

Focus your attention

Reviewing your businesses budget can be a very valuable exercise.  It will focus your attention on how your business is doing and help you to keep control of costs.  It should also give you a target to achieve for the future.

If you are in business on your own, it may be beneficial to speak through your budgets with someone who understands your business, like your accountant, for example as this may help you to look at the bigger picture, question your processes or brainstorm ideas.

The information provided in this blog illustrates my opinions and experiences, it does not constitute advice and I do not accept responsibility for any actions taken or refrained from as a result of reading this post.