COVID-19: Reducing the financial impact

Jim Fletcher, Locate East Sussex

Business Manager and financial expert, Jim Fletcher has over 30 years experience as CEO of Hastings-based manufacturer, Marshall Tufflex. 

Here, Jim looks at some simple and effective measures that any business owner might consider to help minimise damage to their business during these difficult times.

1.      Think about your solvency

Right now, you must be honest. If you have an accountant or finance manager, talk with them about your situation, if not, make an assessment yourself – quickly. How long can your business last if the downturn continues? How much cash is collectable from customers, your bank balances? Consider what you owe suppliers and HMRC.

You will have some room to manoeuvre in the coming months if you have net cash reserves. If you have more liabilities than assets, you will need to consider your options quickly. You will be especially vulnerable to a reduction in sales and profitability.

2.      Think about your cash

You’ll have heard it countless times – cash always was, is and will forever be king. Any reserves you have will quickly disappear especially if your business is making a loss, so get in touch with your customers and suppliers right now.

See what you can do to chase any outstanding customer debts – even if they have not yet reached their 30-day payment date – the sooner you get this money in, the better.

Think about selling in advance to customers who may have cash now that they want to spend now to meet an anticipated requirement later.

Voucher schemes work just as well in manufacturing and service-based businesses as they do in retail. Anything that keeps cash flowing and keeps people working is worth thinking about, and you can also sell anything that you no longer need such as surplus or discontinued stock, and machinery you don’t use anymore. List it on eBay and see what happens and talk to contacts who may be interested.

Talk to suppliers and see if they will agree to longer repayment terms. You must do what you can to keep things going – even if they’re going more slowly than they would normally.

In most cases, you will still need supplies and the suppliers will still need you as a customer, especially when things start to improve. It’s just the same for customers, so make it easier for them too. Think about working with your customers and suppliers and improving your systems for receiving and making payments and make sure your customers know you are the best people they can do business with.

The Chancellor of the Exchequer has laid out a few measures that are evolving throughout the weeks and months, so it is worth looking at the GOV.UK website daily to see the latest updates about the various measures as more details are announced. By accessing these first you may be able to avoid borrowing or at least reduce the amount you need.

3.      Business Insurance

Check your business insurance policy for business interruption cover or affected by ‘force majeure’. The definition of ‘interruption’ has recently been changed so it may be that you qualify even if your business continues at a reduced level rather than stops completely. Talk to your insurance broker NOW.

4.      Prepare

Make the time to review your cash flow for the next few months. Work with your accountant, finance director or business advisor and do a simple cash flow forecast. Meet at least each month to review and amend your forecast and see where you are going. Note down all the assumptions you make on which you base decisions – it will help you to remember how you reached the conclusions you did and hopefully help you to take a positive view on readying your business for the future.

While looking at cash flow, also look at your costs. Be as focused as you can on reducing costs and looking at what planned expenditure can be deferred. Re-examine the benefits that any expenditure will bring – if it’s insufficient, then defer.

Make sure you talk to your bank, tell them what you are doing, keep them up to date with progress and ask for any advice on the government schemes that have been announced that you could benefit from.

Even if you don’t think you will need help, the next few months are far from predictable – you might just need them, and they are far more likely to support a well-run company. If it turns out you do need support, get in quick and early.

5.      Explore possibilities

Every business is set up and based on a few basic assumptions, and these do not include customers working from home and self-isolating. Think about possible new income streams for your business in order to make use and retain your hard-won resources. Can you still serve your customers but do this remotely? Is it possible there are new customers out there who you have not yet reached?

6.      Responsibilities

As a business owner, you will have already achieved a lot, and with the challenges that we are all facing now, you need to show real leadership. You must inspire those who work for you, those who buy from you, those you buy from and the community in which you operate.

Avoid joining in unfounded speculation about what may happen. Be a reliable and trustworthy part of the future that will ultimately emerge.

The chancellor has introduced a new job retention scheme, backdated from 1 March 2020 for a period of three months or longer that will supply businesses with grants to cover up to 80 per cent of wage costs. For your business, it may not be enough to keep your business solvent but think of the cost of hiring and retraining after this crisis is over.

7.      Seek free, impartial advice

The team at Locate East Sussex is delivering business support virtually and supporting businesses as usual. If you think you need help to work out your next steps, please ask. Any support we can offer is always provided at no cost. We will do all that we can to support the businesses that drive the East Sussex economy. We want you to emerge at the end of this in a strong position to be able to play a role in supporting local communities in the future.

There will not be a single business owner who is not desperately worried about what will happen to their business over the course of this crisis.

Jim FletcherBusiness Manager

For support and advice on how to progress with your business goals get in touch and one of our team will contact you to discuss you needs.