6 ways to keep your business finances on track during the COVID-19 pandemic

In any business, cash is the most important thing, and in this environment of lockdown, it is even more important to keep track of it and keep your Suppliers informed and up to date. 

I use a simple cash flow forecast tool in excel which if you wish to contact me, I can share with you.

Email [email protected]

There are several support schemes from the Government (outlined below), but there are things you can do yourself to keep your finance on track during and post lockdown.

The Problem 

A lack of income is obvious during the lockdown, but there may be other ways of using your USP’s to gain prospects in these unprecedented times.

Look at the long term rather than the short term and help wherever possible as this will help when we come out of lockdown.

It's important to continue marketing, but keep looking at your budget on a ROI basis.

The Solution

5 Solutions To Your Cash Flow Problems

Here are our top 6 solutions to cash flow problems that should provide you with valid management strategies before they cause your business major issues.

1) HMRC Support 

To read more from the source, click the link here. 

VAT Deferral 

If you’re a UK VAT registered business and have a VAT payment due between 20 March 2020 and 30 June 2020, you have the option to:

• defer the payment until a later date
• pay the VAT due as normal

It does not cover payments for VAT MOSS or import VAT.

HMRC will not charge interest or penalties on any amount deferred as a result of the Chancellor’s announcement. You will still need to submit your VAT returns to HMRC on time.HMRC will continue to process VAT reclaims and refunds as normal during this time.

If you choose to defer your VAT payment as a result of coronavirus (COVID-19), you must pay the VAT due on or before 31 March 2021.

You do not need to tell HMRC that you are deferring your VAT payment.

If you normally pay by Direct Debit, you should contact your bank to cancel your Direct Debit as soon as you can, or you can cancel online if you’re registered for online banking.

VAT payments due following the end of the deferral period will have to be paid as normal. Further information about how to repay the VAT you’ve deferred will be available soon.

Support for businesses that pay little or no business rates

Small Business Grant 

The Government will provide additional Small Business Grant Scheme funding for local authorities to support small businesses that already pay little or no business rates because of small business rate relief (SBRR), rural rate relief (RRR) and tapered relief. Overall, this will provide a one-off grant of ￡10,000 to eligible businesses to help meet their ongoing business costs. 

Coronavirus Business Interruption Loan Scheme

This scheme helps small and medium-sized businesses affected by coronavirus (COVID-19) to access finance of up to ￡5 million.

Important Note: Your first port of call should be your present Bankers as they are concentrating on their clients at the moment with most of them not agreeing on loans for non-customers.

Department for Business, Energy & Industrial Strategy and British Business Bank

The Coronavirus Business Interruption Loan Scheme (CBILS) supports small and medium-sized businesses, with an annual turnover of up to ￡45 million, to access loans, overdrafts, invoice finance and asset finance of up to ￡5 million for up to 6 years.

The Government will also make a Business Interruption Payment to cover the first 12 months of interest payments and any lender-levied fees. This means smaller businesses will benefit from no upfront costs and lower initial repayments.

The Government will provide lenders with a guarantee of 80% on each loan (subject to the pre-lender cap on claims) to give lenders further confidence in continuing to provide finance to small and medium-sized businesses.

The scheme is delivered through commercial lenders, backed by the government-owned British Business Bank.

There are 40 accredited lenders able to offer the scheme, including all the major banks.

You’re eligible if your business:

• is based in the UK
• has an annual turnover of up to ￡45 million
• has a borrowing proposal which the lender would consider viable, if not for the coronavirus pandemic - This is really key !

Important NOTE: Funding Circle is offering loans under this scheme with no penalty for repayment so we could apply for a loan and repay it in a year’s time interest and Completion fee-free.

Statutory Sick Pay (SSP) paid to employees due to coronavirus (COVID-19)

Find out if you can use the Coronavirus Statutory Sick Pay Rebate Scheme to reclaim employees’ coronavirus-related Statutory Sick Pay (SSP).

• Who can use the scheme
• Records you must keep

The online service you’ll use to reclaim SSP is not available yet. HMRC will announce when the service is available and this guidance will be updated.

The Coronavirus Statutory Sick Pay Rebate Scheme will repay employers the current rate of SSP that they pay current or former employees for periods of sickness starting on or after 13 March 2020.

If you’re an employer who pays more than the current rate of SSP you can only claim the current rate amount.

The repayment will cover up to 2 weeks starting from the first day of sickness, if an employee is unable to work because they either:

• have coronavirus
• cannot work because they are self-isolating at home
• are shielding in line with public health guidance

Employees do not have to give you a doctor’s fit note for you to make a claim.

Coronavirus Job Retention Scheme 

Check if you can claim for your employees’ wages through the Coronavirus Job Retention Scheme

Find out if you’re eligible and how much you can claim to cover wages for employees on temporary leave (‘furlough’) due to coronavirus (COVID-19).

The online service you’ll use to claim is now available.

If you cannot maintain your current workforce due to operations being severely affected by coronavirus (COVID-19); you can furlough employees. By applying for this grant, you will cover 80% of their usual monthly wages costs (up to ￡2,500 a month), plus the associated Employer National Insurance contributions and pension contributions (up to the level of the minimum automatic enrolment employer pension contribution) on that subsidised furlough pay.

The temporary scheme is in place for 4 months starting from 1 March 2020, but it may be extended if necessary, and employers can use this scheme anytime during this period. It is designed to help employers whose operations have been severely affected by coronavirus (COVID-19) to retain their employees and protect the UK economy. However, all employers are eligible to claim under the scheme, and the Government recognises different businesses will face different impacts from coronavirus.

The way to make a claim is online- the service should be simple to use and any support you need available on GOV.UK.

Please use the online support and do not contact HMRC unless it is necessary - any questions should be directed at your agent, representative or our Webchat service.

HMRC will check claims made through the scheme. Payments may be withheld or need to be repaid in full to HMRC if the claim is based on dishonest or inaccurate information or found to be fraudulent.

Dishonest or deliberately fraudulent claims put our essential public services and the protection of livelihoods at risk during these challenging times.

HMRC has put in place an online portal for employees and the public to report suspected fraud in the Coronavirus Job Retention Scheme.

Pay your Self Assessment tax bill

The deadlines for paying your tax bill are usually:

• 31 January - for any tax you owe for the previous tax year (known as a balancing payment) and your first payment on account
• 31 July for your second payment on account

Because of coronavirus(COVID-19), you can delay making your second payment on account. If you choose to delay, you’ll have until 31 January 2021 to pay it.

2) Review Overheads

Overhead expenses can cause some cash flow problems – hardly surprising when there are so many annual charges to pay. Charges can apply on rent, utilities, IT equipment and other expenses that do not even link back directly to the product or service you’re selling. If not regularly monitored, these overheads could impact directly on your cash flow, leaving you with little room for expansion.

One of the basic cash flow management strategies recommended would be a complete audit of your overheads. Have you considered how your expenses have increased over time? And is it worth reviewing your expenses in light of any recent changes to your outgoings? Only with an audit and ongoing checks of your expenses will you be able to identify the sources of your business cash flow problems. You will need to consider negotiating new terms with suppliers and pushing this to the limits and also looking for time to pay in the present climate.

Once you’ve identified the problem areas when it comes to overheads, you’ll then be able to take action.

Consider the following actions post-audit to help you cut the fat:

• negotiating new terms with suppliers, pushing this to the limits (Use the fact that you will be buying more from them in the future riding on the success of your campaign.
• Haggle with utility providers or go elsewhere
• Eliminate non-essential expenses
• Switch your phone provider to an internet service
• Are teleconferences possible so that travel to meetings is kept to a minimum?
• Outsource tasks to freelancers where it may not warrant a full-time member of staff, e.g. Receptionist 
• Do you share premises with another business? Rent out equipment to them for shared use or see if you can pool your budget for basic office equipment
• Insurance - Review all insurance 

Info on Business Interruption - https://www.hiscox.co.uk/coronavirus-help-support

“We are keeping our business open, but we are experiencing a reduction in custom and a subsequent loss of income/profit as a result of the Government’s social distancing advice relating to coronavirus. Are we covered for these financial losses?”

There is no cover under your policy in these circumstances because there has been no ‘insured damage’ to property and a fall in income is not ‘interruption’.

3) Asset finance solutions that make investments more manageable

If the service you provide your customers is highly dependent on the use of equipment, whether that’s IT equipment or more technical machinery such as healthcare equipment, or agricultural machinery, you may find that purchasing it outright has a negative impact on your cash flow.

Asset finance could be an invaluable method of solving cash flow problems for your business, minimising the amount of capital you pay upfront. An asset finance solution could provide you with the business equipment you require to operate while reducing risk to your business. Plus, by spreading your costs into easily-manageable regular payments, there are no unexpected costs for the period of your asset finance contract.

Where buying business equipment outright may cause cash flow problems and leave you with a large dent in the capital, asset finance will do quite the opposite. With the right finance package, you’ll be able to spread the cost of your investment, often paying a small upfront payment for the equipment you need, then paying off the outstanding sum in manageable monthly instalments.

You may be able to choose a fixed or variable interest rate depending on your requirements and, with many finance structures, you have the option to own the equipment once all instalments and purchasing fees have been made, giving the added benefit of using the asset as a part exchange when you need to update your business equipment.

Alternatively, if you’re happy with business equipment that you already own outright, you may want to talk to your provider about refinancing:

4) Refinance and re-consolidate assets

Still, some lenders have an appetite for this, and If cash flow problems are putting a strain on your business, you may want to consider refinancing any existing assets to help you free up working capital.

How could refinancing assets help your cash flow problems?

Firstly, refinancing is usually only available for those assets which the business owns outright. However, some opportunities to borrow against the equity of the financed equipment may be available to you – ask your provider about all your options before you settle on a solution to your cash flow problems.

Your provider will then be able to lend against the value of the asset, helping you to free up the working capital tied up in your existing business equipment. Monthly repayments can then be organised so you can repay the provider at a steady, manageable rate.

When your business’s cash flow problems require a quick, simple solution, refinancing existing assets could provide you with a fast cash injection. Unlike traditional lenders who may only provide finance solutions on brand new machinery, those who provide a refinancing option can use the asset itself as security, so that you can receive much-needed cash within a matter of days.

5) Invoice financing that releases cash when you need it

Are slow-paying debtors the source of your cash flow problems? Often, businesses may be strapped for cash when their invoicing cycle means payments don’t come back into the business until a month after the service or product was provided.

If your invoicing process is already efficient, where clients are being invoiced immediately after the project is finished and have clear guidelines as to when the payment is due, then you’re already onto a winner. But if slow-paying debtors are still causing cash flow problems, you may want to consider invoice financing.

A form of asset-based financing, invoice financing will help you release the capital tied up in unpaid invoices. With an expert provider, you could receive advance payment at a pre-agreed percentage of the value of the invoice. Certainly helping you to speed up the flow of cash into your business and, depending on the service chosen, can outsource the credit control and payment collection process too.

6) Business loans that take the pressure off

Still, wondering how to solve cash flow problems? If you’re still struggling to implement the above cash flow management strategies, you may want to apply for a business loan. A business loan, taken out at the right time, will take the pressure off you almost immediately as long as it is dealt with strategically and with other upcoming expenses insight.

Consider whether a loan is plausible for your business. Do you have the funds at present to afford the repayments? Are your circumstances likely to change that will make it more difficult to make the repayments?

Keep this in mind before signing on the dotted line. Although a business loan will inevitably give your working capital a boost, it should be manageable for you and your business in the long run.

Conclusion

Once your Overheads audit has been done, then implementation is critical, and a realistic cash flow forecast needs to be drawn up to solve the problem and ensure you deliver and protect your business reputation.

Looking for further advice?

If you’d like further advice on cash flow problems and solutions that could be right for your business, get in touch with David Bate at dabConsult/ Anglo Scottish Finance on 07766461811 or [email protected] 

With years of experience providing cash flow finance solutions for business across the UK, we could provide you with the right methods of solving cash flow problems, giving you the cash injection you need, at the right time.