Managing Rising Costs: Practical Steps for Mid-Sized Businesses to Stay Afloat
SMART STRATEGIES FOR COST CONTROL, CASH FLOW RESILIENCE, AND OPERATIONAL EFFICIENCY
Mid-sized businesses are facing mounting pressure as inflation, wage increases, and supply chain volatility continue to strain operating margins. While the UK economy is showing signs of recovery, the path remains uncertain — particularly for companies without significant cash reserves.
Energy bills remain high, import costs are volatile, and interest rate pressure means borrowing is more expensive than in previous years. According to the British Chambers of Commerce, 52% of mid-sized firms reported increased concerns about cost pressures in Q1 of 2025, citing energy, transport, and staffing as primary contributors.
With these factors combining, it’s critical that mid-sized business owners take proactive steps now to protect their financial stability — and avoid potential insolvency risks later.
KEY SIGNS YOUR BUSINESS MAY BE STRUGGLING WITH RISING COSTS
While some cost increases can be absorbed temporarily, ongoing financial strain may point to deeper challenges. Business owners should watch for the following red flags:
Reduced Cash Flow: You’re finding it increasingly difficult to pay suppliers or HMRC liabilities on time.
Increased Borrowing: You’re relying on credit facilities or overdrafts more heavily to meet short-term costs.
Delayed Payments from Clients: When clients are also affected by rising costs, payment terms may slip, impacting your ability to cover expenses.
Shrinking Margins: Even with strong sales, profit margins may be eroded due to higher fixed and variable costs.
Staffing Constraints: You’re unable to offer competitive wages or retain experienced employees.
If more than one of these applies, it may be time to seek professional financial support and explore options for restructuring or cost management.
PRACTICAL STEPS TO MANAGE COST PRESSURES EFFECTIVELY
There are several ways mid-sized businesses can respond strategically to rising costs without resorting to drastic cuts or reactive decision-making.
1. Conduct a Full Cost Review
Begin with a thorough audit of your fixed and variable expenses. Identify where inefficiencies lie — from supplier contracts to unused subscriptions or outdated processes.
Reassess energy contracts, rent agreements, and equipment leases.
Consider switching to suppliers offering better terms or more consistent pricing.
Identify which costs are essential for growth and which can be trimmed without long-term impact.
2. Negotiate Payment Terms
If cash flow is strained, open lines of communication with creditors and suppliers. Many will prefer flexible repayment over losing a client.
Request extended payment terms or temporary relief on instalments.
Speak with HMRC about Time to Pay (TTP) arrangements for VAT, PAYE, or Corporation Tax.
Consider appointing a licensed insolvency practitioner to assist in negotiations.
3. Streamline Operations
Look for areas where your team can work smarter, not harder.
Invest in automation tools to reduce manual processes and improve output.
Cross-train staff to increase flexibility in operations and reduce dependency on external support.
Reassess your delivery or production models for inefficiencies.
4. Reforecast Cash Flow
Update your financial forecasts to reflect the latest cost trends and sales performance.
Create multiple scenarios: optimistic, realistic, and worst-case.
Use these to anticipate future pinch points and plan responses in advance.
CONCLUSION: STAYING AHEAD OF THE CURVE
With inflation gradually easing and the Bank of England maintaining cautious optimism, there are still opportunities for recovery — but they must be seized early. In April 2025, new guidance from the Federation of Small Businesses urged companies to review overheads and adopt forward-looking cash management strategies to remain resilient.
At Voscap Business Recovery, we support directors of mid-sized businesses with tailored advice, from cash flow support to full financial restructuring. Whether you need a second opinion or are ready to explore your options, we’re here to help today on 020 7769 6831, or email help@voscap.co.uk.
ABOUT VOSCAP
Voscap’s primary objective is to save your business. Our team of experts’ knowledge in restructuring and turnaround assignments is invaluable when assessing the best option available to your needs. With experience spanning several decades, we have the skill and resources to provide viable solutions within all industry sectors. All organisations go through difficult times and we are here to help. From small to multi-million turnover businesses, we have dealt with the most complex of cases. We offer an initial free assessment in analysing your financial position and providing clear and precise advice making your experience a simple non-complicated process.