Your business can recover from COVID-19 - the essential guide to weathering the storm
Tuesday, June 30, 2020
Now is the time to take action to help your business recover from the Coronavirus pandemic. Businesses have borrowed more than £30 billion from three Government-backed loan schemes since the COVID19 lockdown began in March 2020.
The below article has been provided by FA Simms. The CPAA is making no recommendation or endorsement. The content promotes FA Simms business.
Without doubt significant sectors of the economy are being kept ‘alive’ by funds from the taxpayer. Approximately nine million, that is one in four, UK employees are being supported by the Government’s furlough scheme but this is due to come to an end in October.
The economy is already shrinking considerably and virtually all areas have been hit. Recent data published has shown that the country’s economy shrunk by 20.4% in April which is the largest monthly drop on record. The Government is promising to be ‘activist and interventionist’ as we move forwards but quite how is yet to be clarified. The chief economist at the Institute of Directors, Tej Parikh, said, ‘having provided businesses with life support the Government must now figure out how to stimulate activity’.
The biggest challenge is not knowing what this uncertain future will hold. Every business may have many factors that will or could change and so it can become increasingly difficult to visualise the way forward. Quite a few businesses find themselves in a place that they haven’t been before. ‘Normal’ is unlikely to resume for a while so you must be prepared.
What can small and medium-size businesses (SMBs) do to help themselves at this point?
Take action now – help your business recover
To flourish in the new landscape, for your business to recover, will require innovation both in terms of the use and development of technology but also in working practices. Being open-minded, prepared and willing to adapt to the changing environment that is ahead of you will be crucial.
Now is the time to micro-manage absolutely every part of your business as no money can be wasted – staff, finances, funding, IT, marketing must all be analysed for every possible efficiency. We have recently spoken to a vehicle service centre owner who has discovered two technicians are achieving 50% of the work of a team that was previously seven technicians. It is not uncommon that as a business matures costs are less closely monitored. To survive in the future marketplace unnecessary cost cannot afford to be carried.
Make business assumptions
You have to make some assumptions to be able to move forward. Use this time to plan and analyse for what lies ahead – plan for business recovery. Accurate information will be vital in allowing your business to adjust to life after lockdown and the withdrawal of Government support.
Coping with a potential societal change in behaviour after COVID19 is going to take creativity and flexibility. You may need to develop completely new business models to enable profitability in a post-COVID19 economy. As business rescue professionals, we’ve developed the Kitchen Table Business Support
process to make this modelling simple.
Be assured that if you are not already going through this process, if you have not made some assumptions and produced a pragmatic forecast, then you are likely to be falling behind your competitors who are already in the process of doing this.
Understanding the cash-flow cycle
Having an understanding of the cash-flow cycle
and being able to model scenarios, helps businesses to understand their cash-flow needs. It isn’t only about profit right now: cash is the key driver in the current economic environment.
As your business moves forward it’s important to change the forecast as the reality differs from what has been forecast. For example, a customer pays their invoice later than expected or sales are great than expected. That may mean a payment to a supplier is forced back or brought forwards. The difference in an effective cash flow is moving from responding to cash flow to managing your cash flow.
How to create your own cash-flow forecast
For cash-flow forecasting to help a business to look ahead some key decisions will need to be made. By that I mean that having 20 different forecasts will help with decision making but the “most realistic” forecast will need to be chosen to allow a business to move forwards; to help your business recover That decision may change as forecasts become reality but without making a plan there’s a risk that the business stagnates and doesn’t move forwards at all.
Seek professional advice
To help businesses get in shape, F A Simms & Partners has worked with a range of professional service companies to launch BusinessSupport.co.uk. The site brings together best practice advice, checklists, case studies and how-to guides addressing many aspects of business financing, planning and management within the context of the COVID-19 crisis. Get in touch for a free consultation with our experienced team.