We all applaud what the government is doing for businesses. Alas there is no magic wand to save all the businesses whose income has plummeted. So, take these eight steps to maximise your chance of survival, writes Rory MccGwire, founder of the Donut websites
1. Manage your cashflow
Do two cashflow forecasts covering the best case and worst case scenarios. Use the worst case for your planning, but also focus on any revenue opportunities in the best case scenario.
2. Review all payments
Stop any payments that are not absolutely business critical, including even the smallest direct debits and standing orders. This cost control checklist may help.
3. Furlough staff
Make full use of the Coronavirus Job Protection Scheme. Furlough any employees who cannot be paid from reliable sales income. If you can no longer use self-employed suppliers, direct them to the Self-Employment Income Support Scheme; many self-employed people do not qualify under the initial scheme (eg many of those using Personal Service Companies for tax reasons), but this may change.
4. Defer your taxes
VAT from 1 March has been deferred for a quarter. But if you are struggling to pay any kind of tax, including VAT and PAYE, call the HMRC helpline. HMRC are being extremely helpful and a ‘Time To Pay’ deferment may well be possible.
5. Access additional finance
If you can demonstrate that your business is viable in the long run, you may well be able to open (or increase) a bank overdraft. Alternatively you could take out an 80% government-backed Coronavirus Business Interruption Loan with no interest due for the first 12 months. But a lack of sales mean that many businesses will struggle to demonstrate viability. And in any case, many business owners want to avoid increasing their future liabilities.
6. Check if you’re eligible for rates relief
There are various business rates relief schemes for businesses in particular sectors (eg retail, hospitality, leisure) and those already eligible for small business rate relief and rural rate relief.
7. Negotiate payment holidays
8. Optimise working methods
Having taken these eight steps, you may decide that the business is going to collapse regardless. In this situation, you will need to plan for insolvency, choosing the best way to deal with your particular circumstances. New rules are being brought in to help businesses to continue trading despite being temporarily insolvent as a result of COVID-19, but there are no details at the time of writing.
This post was brought to you by Start Up Donut – one of six Donut websites offering practical help and advice to help businesses succeed.