Tips to protect your business finances in Covid-19

Hillier Hopkins LLP

Chartered Accountants & Tax Advisers

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The Coronavirus crisis has caused huge disruptions to our society, put immense pressure on our economy and both business and personal finances are being put under stress. At our latest virtual SHE Means Business event, senior manager Liz Wicks talked about ways to protect your business finances through the crisis. Here’s a summary of her top tips.

Take ownership of your situation

Maintain accurate financial records to track your performance, because knowing your current situation will allow you to make informed decisions. Consider the following:

  • Are you making profits or losses? How big are these profits/losses?
  • Are you still trading? If not, you may still have costs even if you have no revenue. Can these costs be minimised?
  • Looking at the fixed vs variable costs. Can any of the variable costs be reduced?

The situation and Government guidance is fast moving and continually changing, so make diary reminders to repeat the above and be aware of your own position.

Cash is king

The adage cash is king has never been truer, so make time to focus on cash preservation. Prepare a simple cashflow forecast. Cashflow forecasting is not an exact science but it will allow you to identify in advance whether you are likely to run out of cash. Furthermore, financial institutions and insurers may want copies of your cashflow forecasts before approving funding or policies.

Once prepared, identify potential sticking points – keep in mind that deferred tax bills will need to be paid eventually! Revisit assumptions and use known information to update your cashflow forecast accordingly.

You should proactively manage your cashflow by:

  • Accurately recording current transactions. Cloud solutions are a great way to do this;
  • Considering timings of your future outflows. If you need to defer payments, speak to your suppliers and review timing of tax payments;
  • Considering timings of your future inflows. This includes any overdue customer debts, accessing the variety of Government support schemes available and speaking to any lenders you may have dealings with.

If you don’t currently have a cashflow forecast, you can download our simple cashflow forecast template below and get started today.

Opportunities

This could be the perfect time to consider if there are opportunities for your business.

  • Are there products and services you can offer that would help your customers through this? What could you charge for such products and services?
  • Look at alternatives in your supply chain which could benefit your business long term (for example, better quality, more environmentally friendly).
  • Use any downtime you have to upskill and train online, giving you an advantage over your competitors.
  • Could you adapt your pricing or consider special offers to increase volumes? Warning: this is not for everyone, as you may not be able to undo this!

Mind the gap

Once you have up to date and accurate financial information (take ownership) and prepared a cashflow forecast (cash is king), review these analytically for the pitfalls. Once you’ve identified the pitfalls, take action.

Don’t be afraid to ask for help:

  • The Government has launched a variety of schemes to support businesses; accept this help where you can and when it is affordable. Take a look at our helpsheets for more information on these schemes.
  • Consider applying for CBILS or BBLs even if you don’t need it now as they can take time to process – you can always just pay it back in 12 months if it is not needed.
  • Seek professional advice on the best approach and options for your business.

Government advice is ever changing:

  • Keep an eye on the news and updates. Our Coronavirus page is kept up to date with all the latest developments
  • Take pdf copies of Government advice applicable at the time and keep a file of these.
  • Check the latest guidance before rolling forward Coronavirus Job Retention Scheme calculations (if applicable to you).

If you are a business director/shareholder, make sure that you don’t pay illegal dividends:

  • Look at realisable profits at the date of paying the dividend.
  • Look forward to ensure sufficient reserves to continue trading.
  • Remember that loss making companies can use up opening reserves.

If you deferred VAT due between 20 March and 30 June, it is now time to continue paying as normal so set your Direct Debits back up.

Be careful when personally loaning money to your business. By doing this you will become a creditor and may rank behind preferred creditors, and if the business folds you risk losing your money.

As a business owner in these times you will have to make tough calls. Problems rarely solve themselves and delays could become expensive. If it comes to it, you may have to consider redundancies. Make sure you seek professional advice if you are worried about the decisions you are having to make.

We are here to help. If you are concerned need support with your finances in Covid-19 we can help you through this difficult time. Take a look at our Coronavirus page with all the latest updates, help sheets and guides on the Government Schemes available, or get in touch and one of our friendly experts will assist you. 

Do you need extra information?
Liz Wicks

Liz is a key member of our Education team, and specialises in managing our internal audit processes for many of our larger audit clients.

Contact Liz at elizabeth.wicks@hhllp.co.uk or on 01923 634468