You can’t look at the internet or turn on the TV at the moment without seeing something about the economic damage that the coronavirus pandemic is causing.
There are, though, signs of us coming to the end of the worse of the lock-down, which is great news for businesses and the economy.
But, just like with the virus itself, it is also a precipitous time and it’s important that we as business owners don’t take our eye off the ball and unwind all of the good work that we have done to keep our businesses afloat this long.
Here are some practical tips to protect your business during this phase.
Priority #1 – Survival
Still, the only thing that matters right now is staying in business, which means having enough money in the bank to pay the essential bills and salaries as they fall due. Anything else is a bonus.
You might not have had too much to worry about if you’d built up some cash reserves before the pandemic (see our earlier post on this topic), but if you hadn’t, you could now be getting close to the bottom of the jar and having some sleepless nights.
If that’s you, stay ruthless. Chase in the money that you’re owed like a dog after a rabbit. Nobody will think badly of you for doing it. We’re all in the same boat and your customers will know it’s not fair of them to pass their difficulties on to you.
Be prepared to be pragmatic. You might offer a discount for prompt payment or the option to pay by a small number of instalments, perhaps with a premium in return: anything to get some money out of their bank account and into yours. Don’t waste time, though, on lost causes and throwing good money after bad. If you’ve got potentially bad debts on your books, now could be the time to bite the bullet, write them off and move on.
Go through the overheads again line by line. Ask for a repayment holiday on any loans if you haven’t done so already, seek an extension on any reduction you’ve agreed on your rent, get rid of redundant software licences that have accumulated over the years.
Hopefully, you deferred your VAT last quarter and have claimed any grants around small business rates relief. If you haven’t done this already, look at your options. Think too about whether you need to apply for a Bounce Back loan or CBIL.
Cash should be reserved for projects that have an immediate and material impact on profits.
Priority #2 – New business
Don’t give up on sales and new business.
There is still business out there to be had. Consumers are buying and businesses are adapting to changes in working practices. Now the initial shock is over, there are signs of people spending again and this will increase as the lockdown continues to ease.
Keep communicating with your customers and prospects, maintain your social media presence and go on a drive for new business.
Don’t get left behind licking your wounds while your competitors grab what business is out there.
Priority #3 – Right sizing
This is the tough one, but look hard at the staff you need to serve the customers you now have. Remember that the furlough scheme starts to wind down at the end of July and government support will reduce. The cost of any staff on furlough will start to come back to you.
Can you defer renewing contracts with vendors? They’ll be keen to keep you as a customer so may well be open to allowing a contract extension with deferred or more favourable payment terms.
Slightly longer term, think about disposing of unproductive assets. Have you got plant and machinery that isn’t going to be productive for a long time. Do you even need your offices? Some ways of working have changed for ever.
A little closer to home, what about that fancy car on lease? Do you really need it? The lockdown might well have changed your attitude to what’s important.
Priority #4 – Monitor liquidity, forecast cash flow and make use of digital tools
The general rule of thumb now is to optimise liquidity and cash. Make sure you know what is owed to you and when you are due to be paid. The same applies to the money you owe.
Consider cloud accounting software like FreeAgent, Xero and QuickBooks, which is very easy to use once you’ve got started. You will give yourself a distinct advantage if your invoices and bills are in the system and not piled up on your desk.
And, of course, CaFE is specifically designed to make monitoring cash flow as easy as possible. You will receive notifications when your cash position looks to be running too low, and suggestions on what you can do to avoid the problem.
The full impact of the pandemic on the UK’s small business economy isn’t known to any of us yet. All we can do is tread carefully to protect cash while keeping a lookout for any opportunities that might arise. Personally, I’m optimistic that many good things will come from this phase in our lives. New ways of serving customers, better business practices and leaner, more profitable organisations are all positive outcomes from the radical rethink that has been forced on us all.
I wish you good fortune and best wishes in the months ahead. M.