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A sensible solution: how businesses can respond to COVID-19
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Source: Unsplash
Article by Natasha Frangos, Partner, haysmacintyre & Shalini Khemka, Founder & CEO, E2E
In the face of the COVID-19 pandemic, business owners will understandably be feeling alarmed. With the situation changing daily, reflected in shifting government recommendations and precautionary advice, the uncertainty around the future is inevitable. Yet, there are practical steps that can be taken to protect your business and help it to weather these difficult times.
Business continuity planning
A key focus will be keeping your business solvent. With COVID-19 impacting income streams and stock supplies, rigorous assessments must be undertaken to evaluate where your business is making the most money, and where costs are highest. As part of this, reviewing your financial model on a regular basis is vital. Considering your mix of revenue streams, cash resources, debt servicing timelines, and growth predictions are some of the areas to address in modelling out your business sensibly and securely.
By keeping a tight grip on profit and loss and cash, businesses can move forward with a considered approach, rather than taking knee jerk action. The following practical measures will help to ensure businesses are future-proofed and protected in both the long- and short-term:
Reducing costs
Reducing overall cost base is vital in a crisis: this could be possible through delaying contracts with suppliers; postponing recruitment until it is absolutely necessary; assessing staff head count; evaluating if you can do more with less; or considering whether certain contractors are needed. Now is the time to evaluate if capital spending plans are still relevant in light of changing circumstances.
Preserving cash
Maintaining strict discipline on your working capital is equally essential. If sales are not as expected, consider how far your existing cash resources can take you, as well as what other resources might be available. Collect as much from debtors as you can, consider negotiating payment terms with suppliers to delay cash payments, and actively manage any inventory build-up.
Seeking alternatives
Some businesses may rely on stock from China, which currently faces a number of complications. Make sure you understand where your supply chain might be affected, and whether products could be sourced elsewhere. Sensible, reliable alternatives may need to be sought.
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Keeping the culture and maintaining communication
Flexible and remote working is the present reality faced by all businesses. For some teams, this will be completely new so guidance from leaders on how to adapt will be essential – demonstrating strong and visible leadership will provide reassurance. Maintaining the culture and regular communication within your business will rally team productivity so you may also need to consider alternative communication tools such as Skype, Slack or Microsoft Teams.
Reviewing sales channels
In some industries, physical presence is the lifeblood of operations. Yet, considering current advice on social distancing, thinking about how activities can be moved online is necessary. However, to ensure exposure does not suffer, other actions should be considered to keep relationships strong, and customers and contacts on board – for example, upping social media engagement and keeping in touch with regular video conferencing or phone calls.
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Monitoring consumer habits
With hospitality and retail businesses already reporting a significant drop in revenue, businesses need to be mindful of changing consumer habits, and more crucially, how to respond. For example, the uptick in online sales means that retail businesses may wish to switch their focus to online channels; an adaptive approach is required to help businesses survive in such uncertain times.
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Seeking financial help
There are a range of systems in place to support businesses through difficult times, and in the recent Budget several additional measures were introduced. These are specifically designed to support businesses experiencing increases in costs or financial disruptions due to COVID-19.
These include allowing small and medium sized businesses to reclaim Statutory Sick Pay for sickness absence due to the virus, and temporarily removing business rates for eligible retail, leisure or hospitality businesses. Furthermore, a new temporary Coronavirus Business Interruption Loan Scheme will soon launch to support businesses to access bank lending and overdrafts. The Government will provide lenders with a guarantee of 80% on each loan (subject to a per-lender cap on claims) to give lenders further confidence in continuing to provide finance to SMEs. The Government will not charge businesses or banks for this guarantee, and the Scheme will support loans of up to £1.2 million in value. This new guarantee will initially support up to £1 billion of lending.
Additionally, all businesses with outstanding tax bills may be able to arrange bespoke Time to Pay arrangements. The arrangements are agreed on a case-by-case basis and are tailored to individual circumstances and liabilities. HMRC has set up a new dedicated COVID-19 helpline for advice and support. The helpline’s number is 0800 0159 559. While HMRC state that they prefer to be contacted via their helpline, we expect in most instances, that they will require any application to be in writing, clearly setting out the reasons why the business is unable to pay the tax owed together with a proposed schedule of monthly repayments. They are also likely to request copies of cash-flows and forecasts and perhaps details of past payments to founders/shareholders.
As the outbreak continues, further measures are due to be announced by the UK Government later today in order to support businesses and the wider economy.
Alongside utilising Government initiatives, it is also important to seek advice from advisors and business networks. For example, many companies are offering support on disaster recovery and contingency planning.
Smoothing out the logistics
With home working becoming increasingly widespread, a number of key logistical considerations must be taken into account. For example, are your employees equipped with the right tools to access materials stored in the cloud? Have you considered data protection when sharing information remotely? Have you got appropriate travel insurance in place to cover any cancelled business trips?
Moreover, transparent and timely communication with stakeholders, investors and suppliers is vital. Communicating how you are managing this challenging time through the business, whilst asking for input from these key groups where relevant, will help to maintain strong relationships.
We are operating in evolving and unsettled times requiring an agile approach to business strategy. Whilst difficult decisions may be a present requirement, these will be made keeping the future in mind. Recovery will happen but the time it will take is unknown, requiring business and team resilience to overcome the unprecedented events we are undergoing. In the face of adversity lies opportunity, which, if tackled openly and proactively, can allow your business to get ahead of the market and recover.
To keep up to date with the latest guidance and support for businesses, please refer to haysmacintyre and E2E’s websites. haysmacintyre will be providing regular analysis of developments and E2E will connect you to the UK’s entrepreneurial leaders and provide you access to their ecosystem of support services for SMEs.
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