Following the end of an unprecedented week of change and consequent challenges for business owners, directors and managers, we have been thinking about what we advise to do at this time to best protect you and your business at this time.

Clearly, the generic advice that follows is not necessarily applicable to each of your individual circumstances and we are maintaining our full range of advisory services to enable you to seek bespoke advice. We are, necessarily, operating predominantly upon a “home working” basis and as such if you are able to please first e-mail your normal contact at Barrons and they, or another member of the Team where the individual has been furloughed,  will contact you by return as soon as possible.

1. So where do we start?

What is clear now, if it was not earlier in the week, is that the actions that have been taken to protect us all, and to provide financial support whilst doing so, are going to have a devastating impact upon the economy even if we are all able to return to “Business As Usual” in a few weeks time.

Most, but not all, businesses have found that COVID-19 has had a severe and immediate impact upon their business, and in trying to address what to do in the interim have had to come to terms with the fact that as support programmes are announced and finalised they will nevertheless not be immediately available in terms of dealing with immediate cash flow distress.

2. Cashflow Distress – How Long Can I Survive The Lockdown?

You really do need to have a rolling 90-day cash forecast in place to ascertain this. If you do not have one or are not sure how to prepare one, then please contact us, we can help provide templates, advice and/or undertake to do the work for you.

You must understand how your cash outgoings are to be controlled for whatever duration this Pandemic may last; and that is the problem, no one knows. So we are recommending you look at a potential business interruption until 1^st July as a focal point.

The short term forecast will indicate to what extent you need to necessitate cost-cutting measures – which are likely to be on a significant scale.

We urge you to take careful consideration of what needs to be cut; and what needs to be retained to support you through an impossible time. Try not to cut yourselves off from the provision of good (internal or external) management information and financial advice – there are options to maintain management information where you cannot afford to maintain an in house cost (see later).

Look carefully at what you do not consider to be business-critical payments, consider a renegotiation of terms with key suppliers and deferral of loans, leases and hire purchase agreements – we would be delighted to review your plan if you produce one internally. 

3. Now I Know How Long I Can Survive, What Next?

You will be aware that essentially the key support, other than the Job Retention Scheme (dealt with below), is to come from the Coronavirus Business Interruption Loan (“CBIL”).

Essentially the Scheme is a loan scheme that is seeking to support your business through the short / long term impact of the current situation where the Government will be providing the financial institutions with an 80% guarantee.

Your short term forecast will give a clear indication as to your immediate cash needs – remember though your longer term needs have to be considered as the business recovers and will have to extend to clearing accrued debt built up, and to service any new debt to support the business through the crisis.

We will shortly be releasing a Guide to the Scheme, and most importantly how you should go about preparing your application to maximum positive effect – whatever you have read, you have to properly apply and be assessed for this loan; they will not be being handed out like confetti. Please consider carefully seeking proper advice before making an application – the decisions you take now may predicate the survival of your business, not just in the short term but the longer term too.

4. Job Retention Scheme – Furloughing of Employees

Clearly, you do have an unprecedented opportunity to cut your payroll costs; whilst protecting your staff with a significant proportion of their contractual income – we certainly recommend you use it if you have been impacted by COVID-19 or anticipate that you will be and start immediate furloughing if you have not already.

You must review the impact upon your business now and react accordingly – in most cases the largest fixed cost in your business will be the payroll and therefore you may need to react immediately. The Job Retention Scheme has been announced:

https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme

Whilst we continue to dissect the detail (full analysis will be published by Barrons shortly to supplement previous posts), in terms of reacting swiftly there are matters that we have noted that you must be aware of in seeking to address the employee pool reduction under the Scheme:

• Current employment law will continue to apply
  • Take this into consideration when placing people on furlough leave, in agreements reached when changing terms of employment and all aspects of employment
• Is There A Minimum Period Of Furlough Leave?
  • You cannot claim if someone is on furlough leave for less than 3 weeks.
• Is There Anything I Need To Do To Put People On Furlough Leave?
  • You need to notify the employee of this change as it will be a change to their contract;
  • You need to keep records of this.
• Can I Place Someone On Part Furlough Leave?
  • You have to lay them off completely – you cannot reduce hours /share amongst staff.
  • There have been requests to government for a more flexible approach, but currently it is ‘all or nothing’.;
• Can you take someone off furlough leave and then put them back on?
  • It appears yes, subject to the minimum period of 3 weeks.

5. Try To Maintain Financial Control and Awareness 

• As can be seen above, furloughing may not in itself be sufficient to prevent significant ongoing overheads.
  • If you have a need for someone to perform a function in any given week, then they are to be retained on full pay even if the essential function that they perform is only needed a few hours a day / week.
  • Most notably therefore you will face challenges as to what to do with bookkeeping, accounting, and administrative staff in an effort to maintain key understanding of what is happening to your business in a reduced cost and income environment.
• We strongly recommend that you do need to maintain financial awareness of bank positions, you need to be able to pay people and react to ever-changing circumstances that necessitate a revision to any initial plan.
• Whether you use Barrons currently or not, whether you choose an alternate provider, PLEASE do not leave yourself exposed to no form of financial awareness and visibility, particularly where you rely upon someone to financially advise you ordinarily.
• If you need to cut administrative wages by furloughing consider outsourcing key finance activities such as
  • Short Term Cash Forecasting;
  • Long Term Forecasting;
  • Payroll;
  • Bookkeeping and management accounting
• Outsourced services will maintain, possibly improve, your financial information at a critical time and is likely to provide a very cost-effective against employment in certain circumstances.