We are in unprecedented times. As the outbreak takes hold in the UK we, in the business world, are left wondering how best to insulate our businesses against the impacts of the virus.
The news and advice is changing daily, if not hourly. The breadth and depth of the impact of the virus means that it is hard to conceive an area of our economy and society that will remain untouched. That said, business owners and entrepreneurs are determined and resourceful individuals and they will approach the challenges with courage and resolution.
Much has been written about the public health side of things. It is clearly hugely important that Government guidance is followed. This advice is concerned primarily with the financial health of your business. Whilst the next few weeks are going to be very challenging, we will get through this period and we want our businesses to be on a sound footing at that point. The trick will be to manage short-term cash flow challenges, as revenues fall, whilst maintaining the long-term strength of the business.
Many businesses are already experiencing a significant down turn in sales and this is only likely to continue and extend further as the crisis deepens.
Helen Holman, Associate Director at Inspire, offers some practical steps to help manage your cash flows and build resilience in your business.
Prepare a detailed cash flow forecast, which you can track on a daily basis. Start by performing a detailed review of the business’ commitments, when do suppliers, landlords, HMRC and employees need to be paid? Which of these payments could flex? Dig out your loan agreements and read them thoroughly. What is your best, medium and worst case scenario with regards sales income, which of your customers are at risk, what behaviours are you seeing already? In preparing the forecast, you need to consider the next 10-14 week period (to the peak of the outbreak) and beyond – we suggest 12 months. Realistically, business confidence will take time to recover.
Consider practical steps to defer cash payments. The government has announced a package of measures to support businesses. Among these is a HMRC helpline for businesses and individuals who are unable to pay their tax due to the virus. Help could include the agreement of a deferral period. The HMRC helpline number is 0800 0159 559.
Further assistance could be available from your bank. Banks will look at a business’ requirements on a case-by-case basis and decide how much and what type of assistance could available. Banks may be able to offer loan repayment holidays and the Coronavirus Business Interruption Loan Scheme (CBILS) will become available in the coming weeks. Speak to your bank contact to assess your options.
An important note of caution here, if your business was trading poorly or making losses before the virus, then the banks may find it hard to help you. If this were the case then a conversation with an insolvency practitioner is advised to ensure that you are honouring your duties as a director and are not putting yourself at risk.
Staffing and employment
Of course, leading a team through periods of uncertainty is a huge challenge. Not only must you ensure that you have the right level of resources to fulfil your customer / client needs, sickness absence is likely to increase and be disruptive, you must manage the wage bill from lower levels of income and try to keep up the team spirit. Good communication is essential, keep your team updated as much as possible and consider how you will communicate with employees, especially if you need to contact them urgently. Review how you might resource the business innovatively to keep essential operations ticking over:
- Think through the tasks which could be performed from home
- Look at identifying key services and staff with transferable skills
- How can you keep the team communicating?
- If your operations are severely affected, consider introducing a voluntary special leave policy on a temporary basis whereby individuals can opt to take paid or unpaid leave. Be mindful that there could be some employees who are willing to take additional time off and welcome a break, but others may struggle financially if they lose pay
- Consider offering a shorter working week or other flexible resourcing arrangements, and communicate the business reasons to employees.
We’re here to help you – our team at Inspire has much experience at advising business owners in good and more challenging times. Do get in touch with us, to find out more – our phones will always be answered.
Call 01202 717867 or email [email protected]