There are many businesses who are suffering considerable financial losses with the majority of the country staying at home and observing social distancing. Whatever the position your business is currently in, there are measures you can consider to ensure you come out the other side.
Whether your business is currently unable to trade because of the restrictions put in place by the government or you are seeing a reduction in trade due to businesses closing down, getting on top of your finances would be an excellent use of your time.
Understanding where your business is financially, how much debt you have and which customers owe you will enable you to start planning for the future. This will also allow you to see what financial difficulties might arise if the government restrictions continue for weeks or even months.
Forecast cashflow
The survival of your business both during and after the Covid 19 pandemic will be based on how positive your cashflow situation is. Financial liquidity will be even more important, as businesses see a squeeze in their customer numbers.
As part of your regular monthly forecasting you need to have a good idea of how much cash will be coming in and going out of the bank. This should include all your regular outgoings (such as wages, rent and utilities), as well as any costs for suppliers.
Nobody knows how long the current lockdown situation will last for, but understanding how long you can survive, or where you might need to make savings, is essential if you want your business to survive.
What financial support is available?
As part of the government’s response to the coronavirus problem, they have announced a number of measures aimed at keeping companies afloat. It’s essential that your company takes full advantage of these and applies for anything that you’re entitled to.
These include:
– deferring VAT payments
– Statutory Sick Pay relief package for SMEs
– a 12-month business rates holiday for all retail, hospitality, leisure and nursery businesses in England
– small business grant funding of £10,000 for businesses in receipt of small business rate or rural rate relief
– grant funding of £25,000 for retail, hospitality and leisure businesses with property with a rateable value between £15,000 and £51,000
For more information you can visit the Gov.uk website.
Speak to your bank
Alongside the government, banks have a number of ways they are supporting businesses during the coronavirus pandemic. They may not be suitable for all companies, but it’s useful to have information on everything that is available.
The Coronavirus Business Interruption Loan Scheme can offer loans of up to £5 million for SMEs through the British Business Bank. There is also a new lending facility from the Bank of England to help support liquidity among larger firms, helping them bridge coronavirus disruption to their cash flows through loans. You can find out more on both of these services through the Gov.uk website.
Who are your debtors?
If your business is going through a quiet spell it’s an excellent opportunity to take some time to assess late payments and any customers who have a debt problem. Maximising cash flow is crucial during a slow period, which means you need to keep on top of any bad payers.
Lots of businesses are in the same situation, but that doesn’t mean you can’t chase up the money you’re owed. Once your customers start to access the grants and financial opportunities that are available to them, funds can be used to pay off existing suppliers. It might also be worth offering discounts to customers who pay early – you might lose out on a small percentage of the invoice, but can reap the benefits of the cash being in your account sooner.
How much money do you owe?
At times like this, it’s important to assess exactly how much you owe and to whom. For businesses with a large number of suppliers this could be a substantial amount, whereas for service-based companies they might have very little debts.
If you think that you’re going to struggle paying an invoice on time, it’s beneficial to speak to the supplier early on and explain the situation. Many companies will be in the same position, but, depending on their own circumstances, they may be able to offer you a deferred payment, a payment plan or hold off on taking further action.
Where your business has seen a drop in trading or has closed altogether, put a hold on any further orders from suppliers and see if there are other directions you can move the company. This could include providing an online offering – such as virtual sessions or setting up a delivery service (where this is possible whilst abiding by the government’s social distancing requirements).
Can you make any cost savings?
Cutting costs could be an excellent way to keep the business afloat whilst the situation improves. Take a look at your regular monthly outgoings and see if there’s anything that’s not essential or that you’ve forgotten about.
For example – do you have subscriptions to online services that you don’t make enough use of? Could you reduce your company mobile phone costs? If you pay your own utilities are there savings you could make by switching supplier? Is there a cheaper stationery supplier?
All of these areas often get overlooked when you’re busy running the business, but any small savings can help in the long run.
Staffing costs
Nobody wants to have to let staff go, but if your business is struggling or there is very little work coming in, staffing costs are usually one of the biggest expenses. However, due to the current situation, this doesn’t have to mean making staff redundant.
There are options available from the government that could help you retain staff for the future. The Coronavirus Job Retention scheme means that companies can choose to furlough employees who are not required and the government will pay 80% of their wages. There is a limit of £2,500 a month per employee and this will be open for at least three months from 1st March 2020.
For more information on the job retention scheme click here.
Assess your invoicing system
Having a well organised invoicing system can be an excellent way to speed up payments from customers. Often, we are in such a rush to send out invoices that we don’t stop to check that they’re correct.
Do they have all the essential details included, such as an invoice number, client reference, date and payment details? All of these can help to improve your payments.
Payment terms are another important element of an invoice and typically companies have their default payment schedule set too high. Many businesses won’t pay their invoices until they’re at least due, if not slightly overdue, so reducing your terms could see an improvement in cash flow.
Contact your customers
Even if you’re unable to trade during this period, that doesn’t mean your communications and marketing activities have to pause. Keeping in touch with your customers will ensure they remember you when the situation improves.
This could include sending out an email advising them of your current trading position and how you’re ensuring the safety of your employees and customers. Maintain your email marketing campaigns to cold contacts – their usual supplier may be unable to help them during the pandemic or they might be looking to research new suppliers while they’re quiet.
Take a look at your prices
Putting your prices up isn’t always the answer to a cash flow problem, but it’s useful to know whereabouts you sit in relation to your competition. Use your time to research your competitors and see what type of services they’re providing and for how much.
It might be that you haven’t altered your prices in years and others are now charging significantly more. Alternatively, you might find some other service that you could offer to your customers.
The team at CEA Limited are all currently working remotely and following social distancing measures. However, we are available both via calling 0113 532 8350 or through email at office@cealimited.co.uk and our experienced debt recovery team can assist you with all your requirements.