Don’t feel isolated – 10 considerations for your business in the wake of Coronavirus (Covid-19)
An unprecedented few months lie ahead of us – don’t feel isolated.
An unprecedented few months lie in front of us and whilst we have been promised a £330bn financial stimulus from the government, as business leaders we have to prepare for what will be the toughest time we’ve ever known.
We’re talking to many clients who are in sectors that have been badly affected already. For some businesses the effect is immediate, for others it will take time to filter through. Whatever happens, being prepared could be critical to sustainability. Short term measures to address cash flow are vital but the business model needs to be addressed if there’s a structural shift that is to be confronted.
NOW is the time for positive action. Here are some of the things you should be thinking about:
1. Without revenue you have no business. How are your customers affected? You have to know this in terms of their orders with you as well as their own viability. Don’t under-estimate the loyalty of your customers. We’re all in this together with a shared objective – make sure you’re talking.
2. Review your short term business plan – what are the current goals and do they need to change in the short term? How can your service or product be adapted to a new market or a new use?
3. Some clients are having to think the unthinkable and consider winding their business up – is it a viable option? This is something that may become clearer after the imminent stimulus announcement.
4. Prepare a short term cash flow forecast. Update it regularly and do some ‘what-if’ scenario analysis to analyse the impact of shocks to the forecast. Consider the impact of lower sales, customers paying later, bad debts, lower margins, changes to staffing levels and remuneration structures (salary reductions, bonuses, redundancies), other cost cutting measures.
5. Contact your bank to ensure their continued support. Explore the potential of extended credit or repayment holidays and any advice they might have to give. We’re already hearing that some credit providers are being flexible in terms of what they might offer. If you don’t ask you don’t get.
6. Review bank covenants that might be in place to understand your commitments to the bank.
7. Contact other finance providers (e.g. HP, leasing, contract hire) to explore what support they can provide in the short term.
8. Consider delaying payments to HMRC. Speak to them about time to pay arrangements – in advance.
9. Review any capital commitments that have been made but not yet delivered – can they be put on hold/cancelled if necessary?
10. Be aware of your responsibilities as a director. If you’re looking at a period where losses may be made and the long term viability of the business could be in doubt you will have to remember your responsibilities and duties as a director. It may not take long for a seemingly healthy business with positive reserves to be in a position where it can’t meet its obligations.
This is meant to be a hard hitting list of considerations for those facing the prospect of an immediate loss of revenues. Being prepared for multiple scenarios will set you in good stead to make the right decision at the right time.
And remember, we’re here to help – talk to us.