Financial resilience – what are the key questions business owners should be asking themselves?

It has been nearly six months since the World Health Organisation declared Covid-19 a global pandemic.  Over those turbulent months, businesses and business owners have faced a multitude of challenges and have had to adapt quickly to changes in the way their business operates.

Here, we take a short look at a number of the key issues facing businesses over the coming months.

The end of the Coronavirus Job Retention Scheme (CJRS)

The second iteration of the CJRS came into effect from on 1 July 2020 and there are some key dates coming up. 

From 1 September employers will only be able to claim 70% of salary costs up to a maximum of £2,187.50 per month (down from 80% and £2,500 respectively).  Furthermore, the CJRS will no longer include employers’ NIC and employers’ pension contributions. 

From 1 October the amount employers can claim falls further to 60% of salary costs up to a maximum of £1,875.

As things stand, from November the CJRS will come to an end and employers will no longer be able to claim support towards employment costs.  It is therefore vital that business have factored this into their cashflow forecasts.

Self-employment Income Support Scheme (SEISS)

Claims for the second and final grant for the self-employed and members of a partnership are now open.  As with the CJRS, the value of the grants have reduced to 70% and capped at £6,570.  The deadline for claims is 19 October. Individuals that are self-employer or run their business as a partnership should check if they’re eligible for the grant.

Repayment of deferred liabilities or Government support

 Back in March, HMRC announced that VAT payments due between 20 March and 30 June could be deferred and a significant number of business took advantage of this deferral.  Those liabilities are due to be paid in full by 31 March 2021.  Businesses should be including this in their cashflow forecasts and considering whether there is merit in paying the balance in instalments over the coming months rather than having to find the full amount in March 2021.

Some businesses may have also taken advantage of deferring other tax liabilities such and PAYE/NIC and corporation tax or may have received a Coronavirus Business Interruption Loan.  Consideration should be taken as to when these liabilities are due for repayment.

How has Covid-19 affected working capital?

Even in a “pre-Coronavirus” world, management of a business’ cashflow and working capital was of paramount importance but during the pandemic it has now become critical.  Businesses have been forced to review the components of their working capital to make sure each element is working as efficiently as possible to ease the burden on the business and some businesses have looked to implement new methods of managing working capital.  Some considerations are:

  • Stock – is the business holding too much stock to meet reduced demand as a result of a downturn in activity due to Covid-19.  Have minimum stock levels been reviewed and amended?
  • Debtors – are up to date credit checks taking place and does the business need to approach customers about receiving part/full payment in advance or negotiating a formal payment plan?

A key factor to consider later in 2020 and in the first quarter of 2021 is what impact the above will have on the business’ customers.  Will the end of the CJRS, payment of deferred VAT and commencement of repayment of CBILS loans detrimentally affect their customers’ business?  Businesses need to assess the risk of their customers experiencing cashflow problems before providing goods/services on credit to avoid costly bad debts down the line.

Deal or no-deal?

31 January 2020, the date the UK formally left the EU, may seem like an eternity ago.  The transition period is due to end on 31 December 2020 and it is still uncertain as to whether a deal with the EU will be obtained.  Therefore, in the very near future businesses and business owners that import and/or export will not only need to prepare for our new trading relationship with the EU but also the impact it will have on their business.  Consideration should be given to both regulatory matters (duty, customs), the availability of goods and the movement of goods in to and out of the UK.

Contact us

Please get in touch with Paul Williams, Partner if you need support, or alternatively contact us here.