99% of businesses in the UK are Small and Medium Enterprises. Do you have a ‘disaster response’ plan in place? Few SME’s will have considered the potential impact of such a crisis as we are experiencing now.
It is odds on that you have been too busy trying to make a living to have even thought about such matters. Below are some thoughts as to what could be done to see you through:
1. Keep in touch with your accountant – If you are unable to pay your VAT or tax bills, then they will be able to guide you through the process of contacting HMRC and applying for payment by instalments under HMRC’s ‘Time to Pay Service’.
2. Do your accounts – Get your accounts done as soon after your year end as possible. The earlier you do the easier it will be to plan tax payments.
3. Make a business plan – Take this opportunity to create a business plan until the end of the year. Keep it simple.
4. Review 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 last year’s tax liabilities are not affected by a decline in sales. Investigate whether costs can be spread rather than paying in one lump sum (e.g. car insurance). Give your mortgage provider/landlord a ring if you can’t pay – whatever else happens you must keep a roof over your head.
5. Consider remortgaging – Banks will be lending cheaply. The Bank Rate is nearly Nil. 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.
6. Late payments – When cash is restricted the temptation is to make late payments; this must be resisted if only for reputational reasons. If you can’t pay then tell your supplier – don’t get to the stage when they threaten to take you to court. Pay at least something towards the debt. Check your debtors.
7. Check out insurance policies – Is sickness cover included? This is the value of having Keyman Insurance.
8. Government help – Make sure that you are up to speed with government guidance.
Read the ‘COVID-19: guidance for employers and businesses’.
This guidance provides advice as to what needs to be done if Coronavirus is suspected amongst any members of staff but also details financial measures that are being made available
9. Consult with your bank – Whether in potential trouble or not investigate what help may be available; what terms and conditions there may be (e.g. RBS, Lloyds Bank and Barclays have pledged 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).
10. Join the FSB – Consider becoming a member of the Federation of Small Businesses as they are the first to know of any help available and the advice is free to members.
11. Contact your suppliers – Contact will mean that you will be remembered if the supplier has to resort to restrictions. Investigate the whole supply chain – you may think ‘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?
12. Consider making large purchases – Accountants say that you should have a ‘cash pile’ of at least two months to weather any financial storm. Many SME’s don’t have two months set aside but if you do then consider making any large purchases now (e.g. a car, machinery). You could find that that the deals are more favourable than previously.
13. 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 to reduce costs by rethinking your marketing strategy, this might not be the right time – consistency is key to recovery.
14. Check out SWIB members – Look at the SWIB members directory. If there are businesses similar to yours, suggest buying together in bulk. There is a wealth of knowledge within the group – accountants, solicitors, virtual assistants, insurance advisers, mortgage advisers. Don’t feel that you are on your own.
15. Carry on – It is vital that you must at least give the impression that you are carrying on.
However, if you come to the conclusion that you must give up by selling your business or going bankrupt then do nothing until you have consulted with your accountant, mentor, bank or other financial expert.
The answer is not always to go down either route.
And finally .. look ahead. It’s important to look ahead. As Eliot Hoff, the head of APCO Worldwide’s Global Crisis Practice has said about the virus: “There will be an end to this, as there is with every crisis.”