The coronavirus has hit a number of small businesses across the UK, particularly those involved in hospitality, travel, events and high street brands. With reduced footfall, loss of sales and cancellations, many firms are losing money due to their responsibilities to pay for overheads such as staff costs, rent, taxes and more.
Staying on top of cash flow has never been more important – and whilst some businesses with outstanding orders will look at invoice financing, there a number of things you can do to maintain a good cash flow.
A lot of businesses have ongoing costs, where the larger the company, the most costs it will typically accumulate.
Where possible, try remove any ongoing costs and things that you will not need during the coronavirus lockdown. Especially if people are not going to be in the office, there is no need to keep the orders for teas and coffees still coming in and other unessential amenities.
This can include anything from:
The government has offered a number of incentives to help SMEs with their cash flow. The most talked about initiative is to cover 80% of salary costs for any staff members, up to £2,500 per month for April and May. Other benefits exist for those who are self-employed, sole traders or contractors.
Other options include deferring VAT and self-assessment payments and small grants for those in hospitality. See the full list below:
High street banks are offering three-month mortgage payment holidays and interest free periods for overdrafts, including those looking to open a business bank account.
You can access an overdraft facility and the amount is based on your credit status, company turnover and income.
Overdrafts for both businesses and individuals usually cost around 30% to 50% per month and considered one of the most expensive forms of borrowing in the UK.
If your business is made up of contractors such as freelancers, consultants and agencies, see if you can negotiate to maintain a health cash flow.
Check your agreements to see if you can take breaks or pauses without payments – or try come to an arrangement where payments are split, paused or repaid in full later this year.
Express to your contractors that they have access to various government grants and will be able to recover this income short term.
Whilst protecting your costs is key, there is also the necessity of making sure the usual money is coming in.
Equally, some merchants are using the coronavirus as a way to defer or delay payments, but this does not need to be the case.
If the customer cannot repay in full or is taking their time to repay, try follow this up early or if you think the could be avoiding the subject, discuss a payment arrangement.
Discussing repayments with your vendors is very important and in some extreme cases, the sooner you can act, the better. For those feeling the effects of coronavirus, it could be better to get your money owed early, before it is too late.
Various finance companies are offering business interruption loans to help fledging businesses with their cash flow.
Whilst unsecured lending is considered to be a riskier proposition with income still uncertain, anything asset-backed is likely to boost your chances of approval. This could be using invoices, office premises, inventory and any valuable collateral.