As accountants, we are best placed to consider the financial impact that the Covid-19 outbreak will have on small businesses. Each small business is different and there is not a one size fits all approach.
Below are some of the things you, as a small business owner should consider:
1. Keep in touch
Here at Cloud Accounting, we can act as a guide. We will be sending emails. Keep in touch. The sooner that we are made aware of any problem, the easier it might be to solve especially with reference to HMRC payments.
If it gets to the point that you believe you have to put the business up for sale, do nothing until you speak to us. You won't get a good price in this market. The number of clients who take notice of their friends and take action without consulting with their accountant first is surprising. The answer will not always be to go bankrupt or close the company.
2. Consider your cashflow
Work out your monthly cashflow for the next 3 months – sales and costs, including those deferred.
Aim to remove discretionary cost. Seriously consider removing marketing costs.
Add the income from government support packages
Try to spread the costs as much as possible.
Try to plug any gaps with bank finance.
3. Check out those in potential problems with HMRC
Check whether each client has paid their last tax bill. If not, tell them about HMRC's Time to Pay Service. All businesses in financial distress and with outstanding tax liabilities may be eligible to receive support. Consider those who might have difficulty with the July payment and advise accordingly.
4. Investment in capital items
Investment advisers say that you should have a cash pile of at least two months to weather any financial storm.
Businesses that do and might have been considering making a large purchase such as a van could find that that the deals are more favourable now than previously.
5. Check insurance policies
Check out any insurance policies you may have – are you, or your staff, covered in any sickness claim? This is the value of having keyman insurance.
6. Government help
Make sure that you are up to speed with government guidance including the COVID-19: guidance for employers and businesses factsheet.
- Refund for businesses and employers required to access Statutory Sick Pay
- A 100% Business Rates retail discount for one year
- Funding support for those small businesses that pay little or no Business Rates because of Small Business Rate Relief
- The Coronavirus Business Interruption Loan Scheme
- The CoronaVirus Job Retention Scheme
7. Financial Help
You should investigate what help is available from your bank, what terms and conditions there are, and whether the help is currently needed. Most banks have pledged to offer support by mortgage repayment holidays, temporary increases in credit card limits, waiver of fees on early access to fixed savings accounts and late credit card, mortgage, and loan payments.
8. Supply chains
Contact your suppliers. Suppliers will be more likely to contact you if they have to resort to restrictions. We advise investigating alternative suppliers. Supply chain issues are already threatening to derail some small businesses. Investigate the whole supply chain – you may say 'it's OK I get my supplies from XYZ Ltd based in the UK', but do you know where XYZ Ltd gets its supplies from?
9. Late payments
When cash is restricted, the temptation is to make late payments. This must be resisted, if only for reputational reasons. Late payments are already causing problems for businesses as 74% of business owners reported invoices due to be paid at the end of February had not been settled and were unlikely to be cleared before the end of March (business lender MarketFinance.com). Check your debtors! Tighten up your invoicing processes.
10. Review business costs
Look at all costs and reduce discretionary and non-essential expenses as far as possible. Fixed costs such as wages, rent, utilities, financing costs and tax liabilities not affected by a decline in sales need to be properly managed. Suggest investigating whether costs can be spread rather than paying in one lump sum (e.g. car insurance).
11. Review marketing strategy
No one is going to do or buy much other than the essentials during this crisis and, although this situation might lead you or your clients to reduce costs by rethinking the marketing strategy, this might not be the right time – consistency is key to recovery.
12. Review mortgage payments
Banks will be lending cheaply. Now might be a good time to consider remortgaging both your business and personal finance. Mortgages are based on past data, which will invariably be better for these past three years – defer applying and that may mean lending based on reduced profit figures making it more difficult to get a mortgage.
13. Carry on
It is vital that the business must at least give the impression that it is carrying on. This may be impossible if the business is a restaurant, but is feasible for the many others who might have to self isolate. There are such businesses as Virtual Assistants that can help.
If you have the facility to invite clients into your accounting software, now might be a good time to place this at their disposal. Consider plugging their books into bank data feeds, if not already used.
And finally, 14. look ahead
The coronavirus crisis will change the way businesses and society works. When the urgent part of the crisis is over, businesses should consider what this crisis changes for them, what they have learned and plan for any future crisis.