Formulating your plan to beat the virus
Formulating your plan to beat the virus
1. ForecastingUpdate or prepare a 6-month cashflow forecast. It is essential that you evaluate your own cashflow needs and understand the amount of any cash flow “hole”. This is the amount of cash that will need to be found until normal cashflow starts to flow again. You need to build in the reduced activity within your business and also anticipate other changes such as shortfalls in receipts from your customers. Conserving cash today is vital, but this needs to be balanced against steady, albeit reduced payments to suppliers so they continue to support and help you. There are many variables to consider and making the most of your options is important. We have already begun planning with several clients both at a detailed modelling level and at a consulting level. You must know the size of the hole before you can plug it.
3. Talk to HMRC and Local Government for a time to pay (TTP) arrangementThis was a major element of the government’s stimulus through 2008-2010. It is likely to be so again. However, the lessons from last time are that there are rules and procedures. Properly supported and well-presented plans are necessary. You will need to extend your short-term cash flow models across the repayment cycle. Seeking multiple TTPs on an ad hoc basis for PAYE, VAT and rates is unlikely to achieve a sensible outcome which the Company can adhere to and failing to maintain an agreed TTP may be one failure too far. TTPs will be necessary in many cases and we have a proven record in delivering these for our clients over many years. Please be ahead of the game and do not hesitate to pick up the phone.
3. Supplier and other finance providersAgain, this source of additional finance is vital. Paying people reduced amounts but on a regular basis will be necessary. It is imperative that your suppliers remain onside and do not take payment failure as an opportunity to put you on stop, or to instigate some form for formal debt collection or insolvency process. Talking to suppliers and keeping promises are very important. We all need the cash to continue circling round. Other suppliers such as HP providers and landlords should also be approached for small holidays, or a period of reduced monthly obligation made good by you at some point in the future.
4. Approach your bank for a loanWe understand the government’s existing loan arrangement scheme is morphing into a scheme called CBILS. There have been no firm details released yet as to how this will operate, but we cannot see it being more lenient than the system which operated in the financial crisis. As mentioned above, the banks have a serious interest in making sure all loans are repaid in full. Loans will also be assessed by the banks’ credit teams and we know how difficult that process is to understand. Loans will most likely be available for companies who can demonstrate they had a profitable business before the crash, have lost money as a direct result of Covid 19 issues, have no other sources of finance available to them and can demonstrate a full recovery over time using professional projection and modelling techniques. We believe the modelling will need to be done at a reasonably high level internally, or through your advisors. We stress that you should not hesitate to contact us for help if you need it.
5. Restructuring your business operationsUltimately companies have a limit to the amount of losses they can sustain regardless of additional financial support. Loans for any losses incurred must be paid back so it is best to minimise these. Reduced activity may mean you have surplus staff capacity who will need to be paid, or numbers reduced. Understanding your HR obligations, what is possible in terms of redundancy, reduced working hours or reduced pay alternatives could be vital in reducing losses and keeping the business going. Early professional advice is critical in this area as such alternatives often require periods of consultation with the work force for them to be enacted. Over the years we have seen many options for dealing with short term or even longer-term labour issues. It is worth fully understanding what these are.
6. Insolvency adviceClearly the finances of some companies in some sectors will possibly be broken without the company using some form of insolvency process to put in place a restructure. Whilst we are not insolvency specialists, we have many excellent contacts that can advise you. We can, with their help, guide you through the various alternatives available to help you recover in the best way possible. Again, early contact with us is essential if we are to formulate the best plan and get things underway quickly. The larger the problem, the harder the solution.
Summary – we are here to helpThe mechanism by which companies will work through their Covid 19 issues will vary enormously from company to company and sector to sector. Early diagnosis of looming financial problems is critical in identifying the need to conserve cash and make the savings which will help your company survive this outbreak. In summary, we are here to help and can advise either at a detailed modelling level, or on a more advisory basis. We have a wealth of knowledge and experience of these matters which you can dip into to ensure you make the most of all your options.
We believe we are more than just your average accountancy firm. Our goal at Barnes Roffe is to engage our clients through a proactive relationship, which provides you with the resources and tools you need to enable you to take charge of your finances with confidence.
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PLEASE NOTE: By the very nature of this type of information the details of tax law might have changed since they were published, so contact your Barnes Roffe partner before acting on any matter contained in these documents.