When times are tough, don’t shoulder the burden on your own.
COVID-19 has created a national emergency, with the majority of businesses being impacted, disruption in local and global supply chains, along with the personal wellbeing of many staff. Companies with Business Continuity Plans have put these into operation, and companies without such plans, are doing their best to survive.
Many Business Continuity Plans (BCPs) are a call to action and identify the activities that companies will need to undertake in the event of business disruption to enable the business to continue. The best BCPs will also detail how a company returns to business as usual, but this is frequently missing.
Returning to business as usual, is frequently not simple or straight forward, as operations not used for a while could be unsafe, equipment may not restart as planned, supplies could be in the wrong place etc.
Recovery plans (when included in the BCP) are usually only concerned with the business they have been written to support, and not to cater for the size of disruption caused by COVID-19. A successful and speedy recovery from an impact on the scale of COVID-19 will take more than a purely self-centred approach and will have to also understand both upward and downward resources and supply chains.
How we can help
Support for the Challenges
The financial challenges being experienced by most businesses will be very stressful for senior management and in particular the Financial Directors. It is most important that any company under financial stress understands and grades their specific stress points and address these – fast. Below are 3 key actions you can take:
- Create a short and sensible list of actions to consider. The first item on the list is to remember that you are not alone, and that many businesses will experience setbacks on the road to recovery
- Act promptly (but rationally), the sooner that good action is taken the more options will be available to help the business find a way forward.
- Seek help and practical advice from anyone who can understand your business. There is never any obligation having received advice to take it, but every new angle may help if finding the right way forward.
During this time, it will be important to know the commitments and obligations the organisation is under, both in terms of financial commitments to banks, investors and others, and contractual commitments to suppliers and customers. Knowing what to do can be difficult so speaking to our financial and contract experts will help.
Competing Demands for Cash
Even profitable businesses can run into cashflow difficulties if revenue isn’t received in time to honour commitments. For instance, the business may have been trading successfully but customers are late in settling their invoice but the business still have employees to pay. Or, the company may win a profitable order, but it needs an immediate outlay on materials that can’t be immediately covered. We can help you find them and develop a practical plan.
Retain the Support of Key Suppliers
Suppliers are likely to be at the heart of your business. Without their support, it may be difficult to trade. Prompt, thoughtful planning and careful discussions can help if you are coming under pressure from suppliers.
Most suppliers will want to retain good businesses and will be willing to be flexible within existing arrangements or renegotiate terms in return for good customers. Any commitments that can be made to favour a key supplier will also help. If you need to buy some time with suppliers, but still maintain their trust and credit, we can give you the best chance of business continuity by helping to build a better understanding of your business and its needs.
Following the COVID-19 shock to the whole of the UK economy HMRC have made, and are in the process of loosening many short term tax requirements. These are currently only taking the form of a delay to payments due, rather than any cancellation of payments.
Every business has a duty to meet its tax obligations. Whether those obligations are known quantities or contain unexpected surprises, they can hit businesses at awkward times. Knowing which sensible steps can be taken is not always easy. We have insights into many business types and access to expertise which may help to resolve these issues.
How to proceed: 4 point action plan
1. Understand the issue
Take an objective look at the business and the specific problems being faced. Within this step examining the visible symptoms, may well uncover broader business issues that also need to be faced. The following should be checked
- Do you have any unprofitable customers, products or services?
- Are my costs too high?
- Do profits fluctuate? If so then identify when to store cash and when to invest
- Does the company use the right funding?
- Is cashflow an issue?
Identifying the issues is not only crucial to getting back on a sustainable footing, it can also help you win over your stakeholders and secure the goodwill to support the recovery.
The understanding of the key issues (above) should naturally lead to a workable plan. The plan should include checklists, and milestones so that progress can be tracked and identify any critical costs that may arise from implementing it.
It is also very important to maintain lines of communication with key stakeholders, like employees, suppliers and funders. Keeping all these groups ‘on-side’ can be vital to ensuring the business gets back on track.
The plan should be tested, and someone who understands the business should be identified who is capable of doing this task. Whether that be a friend, colleague or trusted advisor who can provide confidence the plan will succeed or honest advice about reservations.
With the plan in place, it’s time to take a step back and assess its implications before execution. How will it immediately affect specific aspects of your business? What will the long-term effects be, both in general and in the way you manage your finances? Consider the following actions:
Forecast the cashflow, for visibility of any peaks or dips of cash in the business.
To maximise cash flow quickly (if needed), consider early settlement discounts for customers, or a small reduction in pricing to drive sales. Whilst this might not be a long term solution, it may improve your short term cash position and give you the time needed to assess your options.
Explore opportunities to immediately reduce your outgoings. Are there any loss making contracts or areas of trading that could be ceased quickly? If paying suppliers quicker than the credit terms require, then you should consider the implications of continuing this practice.
4. Keep moving forward
Momentum needs to be maintained. Don’t loose sight of the checks and milestones, otherwise any recovery may be thrown off track by unwelcome events. The following may be helpful:
- Be mindful of incurring new credit. If there are concerns over the future of the business, any new commitments need to carefully considered.
- If there are concerns that the business may become insolvent (or is insolvent), then it is essential to get advice to ensure you protect employees, and directors alike, and to meet any legal responsibilities.
Finding an advisor to help you through this process is often crucial. Whether a personal contact, your bank or a specialist advisor like us. You’ll find that we’re committed to staying by your side, listening, advising and helping you find a way forward.