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Exclusive: The rent crisis on Main Street just took a turn for the worse – TalkOfNews.com

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The rent crisis on Main Street just took a turn for the worse

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The Federal Reserve chair Jerome Powell said on Friday there will be “pain” to come in the economy as a result of the central bank’s battle with inflation, and right now, small businesses are experiencing that pain on both sides of the fight.

Inflation has been the No. 1 concern of small businesses for some time, as high prices in raw materials, labor, energy and transportation cut into margins. Higher rents, and landlords feeling more aggressive the farther away the nation moves from the peak of Covid, have compounded the hit from inflation being felt on Main Street. While there are some signs of inflation easing across the economy, that’s because the Fed is intentionally cooling demand, and that has small business owners anticipating a sales decline.

What does it all add up to? According to a new national survey of small business owners by Alignable, a big jump in August in the percentage of small business owner who couldn’t pay full rent in August.

Nationally, apartment rental prices, which have soared, are among the inflation indicators that may have recently peaked. But the Alignable data shows that the rent inflation crisis for small businesses is actually getting worse. Forty percent of small business said they could not pay their rent in full this month, up 6% month over month and setting a record for 2022.

“I’ve been following this closely every month since March 2020, and I was shocked,” said Chuck Casto, head of research and communications for Alignable.

The percentage of small business owners unable to make rent hasn’t been this high since March 2021. “This is a number we would have expected right in the middle of the pandemic, when a third of places were shut down, everyone was wearing masks or not going out to restaurants,” Casto said.

Alignable’s poll was conducted from August 13-August 22 among 7,331 randomly selected small business owners. 

The small business rent crisis could make the holiday quarter of the year, always the most important for consumer-facing Main Street entrepreneurs, a critical one for survival.

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It is not new that inflation has become a much bigger concern than Covid on Main Street, but until it eases “and eases significantly,” Casto said, all the small business costs are adding up to another existential crisis for Main Street, highlighted by the concerns over rent.

Forty-five percent of small business owners surveyed by Alignable say they’re paying at least 50% more in rent than they did prior to Covid. Twenty-four percent say their landlords have doubled rent; 12% say they are now paying three times more.

Back to peak Covid concerns about business survival

The Alignable data also shows that many small business are still struggling to get back to pre-Covid revenue levels, just as the Fed is taking steps that are slowing overall demand. Casto said Alignable would hope that the numbers would be trending down among small business owners who say they have not returned to pre-Covid sales marks, but that’s not happening now. Last December, amid the critical holiday season for many small businesses, 43% said they were “fully back,” according to Alignable. “It’s 23% now,” Casto said, “and has just been slipping. … even people who thought they were out of the woods in December or January, all of a sudden they’re not.”

That’s the worst this indicator has been in over a year, according to Alignable.

The Alignable data matches the recent CNBC|SurveyMonkey Small Business Survey in mood, which showed small business confidence hitting an all-time low. And Casto says the rent data is critical because it is a tell about the full picture of what is going on with the finances of small businesses.

Alignable asks small businesses if inflationary pressures including increased rent could jeopardize their ability to stay open over the next six months, and while that data point has not changed considerably in August, it remains uncomfortably high, at roughly 47%-48%. Of that, 20% are “highly concerned.”

As recently as the spring, that figure was as low as 28%.

Casto said that’s the key figure he will be watching in the months ahead alongside the data on ability to pay rent.

“Many of them still haven’t bounced back from Covid, and then you have inflation on top of it, and then, whether you consider this a recession or not, we have an economic slowing and consumer spending down,” he said.

The CNBC small business survey found that expectations of lower sales were the biggest contributor to the quarterly decline in confidence, and many small business owners believe the recession has already begun.

“We’re definitely seeing things recede in terms of activity and customer counts in stores,” Casto said. The inability to get back to pre-Covid sales in terms of monthly revenue generated doesn’t even take into account the extra expenses that inflation has created and a slowing economy. “It’s a combination of everything … everything builds on itself,” he added.

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Real estate options to consider

It’s not all bad news on Main Street. By some recent measures, many small businesses in the service sector, in particular, are doing better and benefitting from the shift in consumer behavior from goods to services purchases. That’s what Intuit data shows, and small business is its biggest lines of business. But the Alignable data on rent shows that the impact of inflation remains broad across sectors of the small business economy, even as some sectors are getting hitter harder and faster than others. In real estate, 40% of small businesses said they couldn’t make rent in August, up from 18% last December.

“Lots of storefronts, even in fancy towns, are no longer there,” Casto said. “We’re not quite to ghost town level, but we’re worried. … We’re at another level of ‘paying rent or not paying rent’. … It’s a much bigger issue.”

There are options for small businesses that are facing a rent crisis. One is negotiating with landlords, though that is getting tougher to do the farther away we move from peak Covid.

“Landlords feel like they let it slide for a year and a half and did everything they could, but now, two years in the hole, need to start asking for money,” Casto said. “Because they could lose their buildings, they are paying mortgages.”

Comments Alignable is receiving from small business owners it surveyed show that more are afraid to ask landlords at this point for even more rent relief, and landlord patience after the past two years is running thin. But the survey also indicates that many landlords still prefer to have a tenant making a good faith effort to pay rent, and catch up on any past due rent, than face an empty storefront during the economic slowing.

“Sometimes these landlords are happy to have the place filled even if it is just getting a portion of the rent, it’s better than not getting any of it,” Casto said.

For business to business owners, he recommends at least considering the ability to go fully remote, and take that overhead from real estate and apply it to other areas of the business. This is a move that Alignable says more B2B owners are making, according to the comments it receives in with the survey data.

The situation makes the fourth quarter, always the most critical for B2C small businesses, and for whom rent is now the No. 1 or No. 2 issue, even more important this year. Small businesses always count on holiday sales to be the biggest sales period of the year, and that’s no different this year, but it’s jut escalated to make-or-break for many businesses.

As the Fed seeks a “soft landing” for an economy it says has not entered a recession, there is the chance that if inflation’s trajectory continues lower, that will mean lower costs across the board for small businesses, and a potential equilibrium point for Main Street could be reached between a smaller hit on margins and the lower sales that will come with a weaker economy. Small businesses have been adjusting for these past few years, pivoting during the pandemic, taking on side gigs to make their financials work (sometimes more than one), and in some cases, retiring earlier than expected (those numbers are up, too). But if there’s a soft landing for Main Street, it’s not likely to be apparent until after the end of this year.

“We’ve heard from small businesses they are counting on Q4,” Casto said. “Q4 will really be telling, and if these numbers don’t improve in Q4, I don’t even want to say what could happen based on what I am seeing. … Hopefully, it will be a ‘make it’ situation for most of them.”

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Exclusive: Florida Woman Sues Kraft for $5 Million Over Prep Time for Velveeta Shells and Cheese – TalkOfNews.com

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Florida Woman Sues Kraft for $5 Million Over Prep Time for Velveeta Shells and Cheese

#Florida #Woman #Sues #Kraft #Million #Prep #Time #Velveeta #Shells #Cheese

Opinions expressed by Entrepreneur contributors are their own.

Velveeta’s microwaveable shells & cheese product takes just three and a half minutes to heat—among the quickest of quick lunches. Florida woman Amanda Ramirez claims it’s not that simple.



Bloomberg | Getty Images

Ramirez’s attorneys filed court documents with the U.S. District Court for the Southern District of Florida on November 18. In the suit against Kraft Heinz Foods Company, Ramirez alleges that heating up an individual serving of Velveeta Shells & Cheese consumes more time to prepare than advertised. She seeks $5 million in damages.

The complaint says instructions on the packaging are “false and misleading.” While the label says you should microwave shells & cheese for 3:30, Ramirez’s attorneys claim the timing doesn’t allow for all the steps required to make the meal. They allege that if you include those—removing the lid and sauce pouch, adding water, heating, then stirring—there’s no way the pasta will be ready in just 3:30.

The 15-page lawsuit also contends that the claim is merited because Kraft is essentially making money as “a result of…false and misleading representations.”

“The Product is sold at a premium price,” the complaint says, “approximately no less than $10.99 for eight 2.39 oz cups, excluding tax and sales, higher than similar products, represented in a non-misleading way, and higher than it would be sold for absent the misleading representations and omissions.”

Ramirez isn’t just seeking $5 million in damages but also a new ad campaign that will correct the alleged misinformation.

Perhaps predictably, Heinz Foods issued a statement to CNN in which the company dubbed the lawsuit “frivolous” and said it “will strongly defend against the allegations in the complaint.”

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Exclusive: China touts vaccination progress at it seeks reopening path; encourages booster shots for seniors – TalkOfNews.com

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China touts vaccination progress at it seeks reopening path; encourages booster shots for seniors

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China says progress has been made in vaccinating elderly population

BEIJING — Mainland China announced significant progress Tuesday in getting Covid-19 booster shots for people “over age 80.”

As of Monday, 65.8% of that age category had received booster shots, an official told reporters.

That’s up from 40% as of Nov. 11, according to prior disclosures.

China also announced a new push to get its elderly population further vaccinated for Covid-19.

An official said at a press conference that vaccination is still effective in preventing severe illness and death, and that the elderly are among the biggest beneficiaries.

The document did not provide specific details on how authorities would go about vaccinating more people.

Analysts have said that getting a greater share of the population vaccinated would help put China on the path to reopening. Only China-made vaccines are locally available so far.

The Covid vaccination rate for older people in China is generally below that of the U.S. and Singapore.

China pushes for vaccination among elderly population

Tuesday’s announcement and press conference followed a weekend of unrest as pockets of people in cities across China vented their frustration with Covid policy. Local officials had tightened measures in some areas, in contrast with signals from Beijing earlier in the month that suggested China was on its way toward reopening.

The weekend demonstrations weighed on market sentiment in Asia on Monday. There were no indications of subsequent protests amid heightened security.

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Mainland China’s latest Covid controls have negatively affected 25.1% of national GDP as of Monday, according to a Nomura model. That’s above the prior peak of 21.2% recorded in April during the lockdown in Shanghai.

When asked in English whether China was reconsidering its Covid policy after the protests, an official simply said they have been monitoring the virus’ development, without further elaboration.

The country reported for Monday the first drop in daily local infections in more than a week.

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Exclusive: How to manage your cash flow during a recession – TalkOfNews.com

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Balance sheet: How to use this financial statement

#manage #cash #flow #recession

Managing cash flow poorly can result in small businesses struggling, especially during times of recession.

Maintaining a healthy cash flow is always essential for your business but it might require extra attention in this difficult economic landscape.

In this article, we talk about how a recession can affect your company cash flow, setting payment terms, increasing the chances of faster payment, who you can turn to for support, and offer plenty more tips.

Here’s what we cover:

Recession concerns

More than three-quarters (77%) of finance brokers say their small business clients are concerned about the possibility of a recession, according to a recent survey by Iwoca, a fintech company that provides credit facilities to small businesses trading in the UK.

Not only that but there was a rise in the number of brokers reporting ‘managing day-to-day cash flow’ as the most common reason for applying for a loan (37%).

Steven Scoufarides, Head of Broker Channel at Iwoca, says: “The current economic outlook for small businesses is precarious – we are seeing signs of an increasing number of SMEs [small and medium-sized enterprises] searching for finance solutions to manage their cash flow and brace for the potential of a recession.

“But, as they’ve proven time and time again, small businesses are resilient and will shield themselves against this economic threat in every way they can.”

How a recession can affect your business

Difficult financial periods can affect a company in a number of ways, with small businesses – many of which have fewer resources and shallower pockets than their larger counterparts – particularly at risk.

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You might find your company’s sales fall as both existing and potential customers tighten their belts.

Some might put in smaller orders or switch to cheaper options in your product lines. Others may ask for discounts or could be slower settling accounts.

You might find yourself spending more time chasing outstanding invoices.

And if a customer goes closes their business because of the economic situation, that will obviously damage your cash flow and cash reserves.

All of these events could have a detrimental effect on the way that cash flows through your business.

And, as we know, cash flow is the lifeblood of any company.

But there’s no need to panic.

6 ways to manage your cash flow

There are a number of actions you can take to shore up cash flow and keep your business at least ticking over during times of uncertainty.

Here are six things you can do now.

1. Be prompt with your invoicing

Staying on top of receivables – the money you get from sales – is essential for healthy cash flow.

This means invoicing promptly and asking for payment to be equally prompt. It also means constantly checking your list of invoices to see what hasn’t been paid yet.

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Good cloud accounting software will flag up when an invoice is overdue and let you see quickly and easily who really should have paid.

It can be used to send automatic reminders for outstanding invoices, too.

Sending statements to regular customers is a good way of gently nudging them to pay and avoiding the risk that they’ll suddenly query a long overdue invoice.

It’s worth noting any slow payers, so you can be prepared when you next issue them with an invoice and you can prioritise customers who pay on time.

If you’re paying out money yourself – for raw materials, venue hire or freelance staff, for example – make sure that whenever possible you receive payment from your customer before the money for your suppliers leaves your account.

Finally, keeping those receivables trickling in on a regular basis is as much your responsibility as it is that of your customers.

Make sure you invoice promptly, that the details of the product or service and who commissioned it are easy to see, and that if your client uses purchase orders and other references, these are correct and immediately obvious.

2. Review your payment terms

Payment terms usually refer to the amount of time a payer has to make a payment to you for a product or service you’ve provided them with.

This might typically be 14 days, 30 days or cash on delivery (COD) if you’re providing a product that has been dropped off at your customer’s premises.

Including payment terms in your invoices and statements is a good idea. They should also mention how you expect payment to be made, which these days is normally electronically.

Timing is important here.

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You can offer a discount for early payment, for example. This might be, for instance, a reduction of 5% if your customer pays within 14 days rather than your standard terms of 30 days.

On the other hand, you can also charge interest for late payments.

Unless you’ve stated your own interest rate, you should apply what is known as statutory interest, which is 8% on top of the Bank of England base rate.

To do this, you’ll have to issue another invoice with this interest charge on it.

It’s worth bearing in mind that this is something of a last resort and you’ll need to make a judgement about whether it’s worth annoying or upsetting a regular, valuable client with such an action.

3. Create a cash flow forecast

Another important step is to create a cash flow forecast, if you don’t have one already.

This will show the expected flow of cash in and out of the business over the next six, 12 or 18 months.

It will usually include income from sales and other sources such as bank interest alongside expenses including wages, raw materials costs, rent and rates plus utilities.

As well as being accurate and comprehensive, it’s important that your numbers are realistic, perhaps even a bit pessimistic. A forecast that overestimates income and plays down outgoings is misleading and can be worse than useless.

However, once you’ve got an accurate prediction of your finances, you’ll have a clear sense of where you are and where you’ll be a few months hence.

You can decide whether to try and cut costs, and if so by how much.

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Similarly, you’ll know whether or not to cancel investment and other expenditure. And if you have a team (or teams), you should also be able to create sales and revenue targets for them.

A cash flow forecast can inform you whether you might have to seek a loan, as well as when and for how much. You should review and update your cash forecast on a weekly basis.

4. Check your profit margins

During financially challenging times, it’s worth checking your profit margins.

You might have a great product that sells very well but how much money are you making out of it? Can you reduce costs or nudge the price up a bit?

Do you know which products or services are the most profitable and are therefore the ones you should be promoting at the moment?

5. Use an accountant

You might be loath to take on a new financial responsibility and increase your outgoings but employing an accountant, even in the short term or on a project basis can be a good return on investment.

An accountant can help with cash flow by providing or advising on services such as bookkeeping, and creating business and finance plans.

They can make sure you’re paying the right amount of tax and that you’re financially compliant.

They’re sometimes able to help you identify business grants and new funding to get you through difficult times.

The Institute of Chartered Accountants in England and Wales will help you to find an accountant, based on your business sector and location.

The Institute of Financial Accountants also has a useful search tool.

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6. Reduce your business outgoings

As well as money coming in, can you reduce your outgoings? It’s worth shopping around for a better deal on your insurance, for instance.

Look through your expenditure or outgoings to check whether there is anything you can cut or exchange for a more cost-effective alternative.

Final thoughts

Recessions can be worrying times for many people. However, it’s possible to regard the current economic landscape as an opportunity to review your business finances and operations.

You can then make some positive changes that will not only get you through the difficult times but set you up to make the most of the economic upturn whenever it arrives.

Editor’s note: This article was first published in September 2022 and has been updated for relevance.

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