A CONSULTANCY firm is offering advice to businesses on how to mitigate uncertainly caused by coronavirus.
Julian Pitts, regional managing partner for Begbies Traynor, a consultancy firm in Yorkshire that specialises in corporate restructuring such as mergers and acquisitions, believes it is “vital” companies without the financial “breathing space” to tackle COVID-19 deal with upcoming challenges as soon as possible, if they want to survive its impact.
Mr Pitts advises businesses to familiarise themselves with financial aid, including the Coronavirus Business Interruption Lending Scheme, ask customers to pay outstanding invoices, reach out to newly-established government helplines and reduce overheads by asking the business property landlord for support.
He said: “Last year was a tough one for many businesses, with sustained difficult trading across sectors that were only just starting to see a ‘bounce’ after the recent election and increased certainty around Brexit.
“As a starting point, talk to your support network. Business insurance might provide the cover required should the company need to stop trading indefinitely. The policy wording should be checked for ‘business interruption cover’ and, particularly, whether there is an extension for ‘notifiable diseases’ – the insurer can advise if this is not clear.
“Talk to the bank about possible emergency finance options. The British Business Bank has now set up the Coronavirus Business Interruption Lending Scheme that will provide the lender with a government-backed 80 per cent guarantee against the outstanding facility balance – so the finance should be attainable for all businesses.
“In addition, the Government has announced schemes to help mitigate the financial impact of coronavirus, with grants covering up to 80 per cent of the salary of workers if companies keep them on their payroll. This has now been matched by grants for self-employed workers worth 80 per cent of their average monthly profits. However, there will still be issues with cash flow for the self-employed as the scheme will not be available until the end of June.
“Businesses should also ask customers, particularly larger companies, to pay outstanding invoices. Morrisons supermarket has led the way with this by paying 3,000 suppliers instantly, regardless of payment period. Small businesses or the self-employed with invoices issued should use this moment to chase for instant payment.
“The Government also offers business support helplines (England – 0300 456 3565) , some of which are dedicated to coronavirus, giving advice on how to minimise/cope with its impacts.
“Another option is to ask the landlord for some breathing space if a drop in trade is impacting on a business’ ability to pay the rent. Landlords may take a generous approach in these extenuating circumstances by providing rent breaks and/or payment discounts.
“It’s also worth remembering that that there is a lot of free professional advice available to businesses. They need to take time to understand the options available if cash flow worsens and the business becomes insolvent; that means there aren’t sufficient funds to pay bills as and when they fall due – such as suppliers and HMRC. Many licensed insolvency practitioners offer an initial consultation completely free of charge to help identify the options available.
“If tax payments are an issue, it may be worth consulting a ‘Time To Pay’ specialist that can defer your tax payments to HMRC. When cash flow problems arise, companies often struggle to pay corporation tax, VAT, and/or PAYE on time. Thankfully, HMRC has already announced that it is waiving late payment penalties and interest for missed tax payments, but businesses should make every effort to get Time To Pay in place rather than assuming the revenue will provide automatic breathing space.
“If your are experiencing a downturn in trade, restructuring could provide more time for recovery. Mitigating losses is key in times of financial distress, so which parts of your business could be streamlined or cut back. Look into subscriptions and contracts that are not needed at the present time.”
“There are also formal procedures available to companies in the form of a Company Voluntary Arrangement (CVA) which shields businesses from creditor pressure and allows them to settle unpaid debts over time. A CVA is a type of restructuring procedure and can sometimes lead to administration, which protects a company and its creditors from further losses and aims to resurrect the business and ensure continuation of trade and employment.”