Coping with Coronavirus: A Business Perspective…
With the World Health Organisation announcing that Europe is now the epicentre of the COVID-19 pandemic and the Prime Minister announcing yesterday that everyone in the UK should avoid “non-essential” travel and contact with others to curb the virus, it seems likely that we will be well into summer before we see the economy return to normal.
The virus is likely to have significant implications for your business and it is essential that action is taken quickly. We are committed to continuing to support our clients through this difficult time and have taken measures to ensure we will be available to offer advice and guidance whilst ensuring we are up to date on changing recommendations and legislation from the government.
Whilst it is extremely difficult to offer generic advice to businesses and the most effective plan for each business will depend on specific circumstances and the sector within which the business operates, we have highlighted below some areas that you may want to consider as a first step.
Whilst this will be a difficult time for many small and medium sized businesses, the one advantage that SMEs have is the ability to be flexible and take opportunities that present themselves.
Credit Control
Credit control will be key as you ensure that your customers continue to pay you on time. The saying ‘Cash is King’ tends to apply at these times so it is imperative that you focus your efforts on ensuring that you protect the cash position of the business.
It may be tempting to stop paying your suppliers however it is important that you discuss this with them first, as they may stop supplying you.
It is also worthwhile contacting your bank to see if you can obtain a capital repayment holiday and using the HMRC time to pay arrangements (see below).
It may also be useful to speak to your landlord, who may offer a rent-free period for you during these times.
Alternative sources of income
This is obviously not straight forward but where possible look at generating alternative income sources, i.e. internet selling, or offering take-away services for those in the community self-isolating, if possible.
Staffing
It is essential that you protect your staff so they can in turn protect your business. However, this is a complex legal area and you may want to take advice from your solicitor to ensure you are clear on what your rights and legal requirements are. The government daily briefing will help you in assessing what plans you need to put in place.
Stock level
You will need to consider whether you need to decrease or increase your stocking levels. For instance, larger businesses tend to operate with minimum stock levels with re-ordering taking place automatically, in the current environment this level of dependence on new deliveries may not be suitable. If you are concerned that a factory shutdown would have significant implication for the future you may need to increase production now. You would need to consider the impact this will have on your cash reserves and of course this can only work if the product is not perishable.
It might be worthwhile contacting your customers and suppliers on a regular basis to ensure that you can react to their needs quickly and ensure that you have the correct stocking levels.
This should also help with communication in relation to credit control and supplier payments.
Contracts
It may be beneficial reviewing all your contracts to ensure that you know what your obligations under them are, especially if you feel that you may not be able to fulfil the terms.
We would recommend that you also take advice from a solicitor, again to ensure that you know your obligations, avoid any surprises and are aware of any remedies.
Insurance
Many businesses may believe that they are covered by business interruption insurance. However, these policies can be extremely complex, and it is worthwhile contacting your broker to discuss under what circumstances the policy will be trigger.
Funding
All of the above should then help you decide how you want to proceed, and whether alternative funding models are advisable for you. We recommend your first steps should be to contact your current bankers however the recent budget set out a series of options for businesses affected by the virus and we would strongly recommend that you review these options and use them were necessary. See our blog here for the latest information covering the funding support measures announced by the government.
Insolvent trading
If you feel that your business is at risk of trading insolvently it is vital you act quickly and contact us. We can support you in this time and also put you in touch with specialist advisors.
In this time of uncertainty it is vital that all options are considered. The above list is not meant to be exhaustive, rather to offer you a starting point for support in this undoubtedly difficult time. The team at Sowerby are here to help for all specific and general enquiries, please do not hesitate to contact us.