Business owners and directors are quite rightly worried about the impact of the Coronavirus pandemic.
While many of the consequences will be with us for some time, it’s likely the most challenging period will be the next few months as we negotiate the financial impact of social distancing and lockdowns. Many of the Government measures suggest that we can expect the strictest restrictions to be in place for approximately three-months. Whilst we cannot be sure how accurate that will prove to be, businesses should be preparing their three-month Coronavirus cash flow.
Every company will be impacted differently; food and medical manufacturers may see positive outcomes, retailers and the airline industry the opposite. What is universally true is that the old adage ‘cash is king’ is never more important than in periods of uncertainty. Here are six top-tips to help manage your cash flow during this period of uncertainty.
1. Bill in advance and request up-front payments
You have costs you have to keep paying and it’s completely reasonable to ask your customers to demonstrate their faith in you by invoicing in advance and collecting deposits. The Government has announced that VAT payments due in respect of the next quarter (until 30 June 2020) can be deferred and paid by the end of the year. Bill in advance, collect the cash and pay the VAT when business returns to normal later in the year.
2. Take advantage of the Business Interruption Loan Scheme
Thanks to the new Business Interruption Loan Scheme, the British Business Bank is offering loans of up to £5m through participating providers, with the Government covering the first twelve months of interest payments. For many businesses this should be enough to cover the immediate cash flow shortfall. If your business is carrying stock that you will now only be able to sell when normality returns, you should be urgently looking at asset-based lending. This gives you the opportunity to borrow against your assets and repay the debt when the stock is sold later in the year.
3. Cancel your direct debits and standing orders
Are you continuing to make direct debit instalment payments for utilities on an office that you are not using? You need to prioritise payments and ensure that those you are making are fair to other suppliers and your employees. Cancel the direct debits and standing orders and look to settle these balances in arrears.
4. Manage your tax payments
You can also approach HMRC to request flexibility on your tax payments, through either a Time to Pay plan or Quarterly Instalment Payments, both of which already have facilities in place so that you can take advantage of them now. Find out more in our article here.
5. Keep your employees on the payroll
When this crisis ends, the future of your business depends on the loyalty and motivation of your workforce. Some roles will become temporarily redundant, but the Government’s Coronavirus Job Retention Scheme means that 80% of their salary, up to £2,500 per month, will be covered if these employees are designated as ‘furloughed’. Keeping your team intact will pay huge dividends once restrictions are lifted so be sure to assess whether any redundancy should be deemed temporary.
6. Adjust your cash-flow plan
Circumstances are changing rapidly so you need to be ready to adjust your plans on a daily basis. Make sure you are speaking to your customers, suppliers and employees regularly. Relationships can be strengthened during difficult times and an open dialogue will help others understand the conflicts you are managing and provide avenues of support.
If you would like to discuss any of the above or have other queries about how you can make the right decisions for the future of your business and your income, please contact your usual Blick Rothenberg contact or one of the Partners to the right.
You can also visit our Coronavirus – Practical Guidance for businesses today Hub for our latest updates and insights.