Cash is king. Nothing new in that. But right now, managing cashflow is crucial to most SMEs.
Here’s what we think you need to do to manage cashflow:
CUT ANY NON-ESSENTIAL EXPENDITURE IMMEDIATELY
Current spending should be limited to the essentials. Preserve your cash.
Prepare short term cash flow forecasts for what might happen in the next month, 3 months and six months. Although these are only forecasts, they will help to clarify your thinking and highlight critical areas. Be realistic with these forecasts. We can help you with these if needed.
SPEAK TO YOUR SUPPLIERS AND CREDITORS
Be transparent and open with suppliers and creditors – we are all in this together.
SPEAK TO YOUR CURRENT LENDERS
Ask them about repayment holidays or any other support they can provide. Explain your current situation and your plans – keep them involved and updated.
DEFER VAT PAYMENTS
Make certain that you defer VAT payments due between 20 March and 30 June. You do not need to apply. The offer is automatic. You will not need to make VAT payments normally due with VAT returns between 20 March and 30 June 2020. You will be given until the end of the 2020-21 tax year to pay any liabilities that arise during the deferral period. All you need to do is cancel your direct debit with your bank and do it quickly so that HMRC do not attempt to automatically collect on receipt of your VAT return. You can view this as an interest free loan from the government, keep this cash for now, you may need it.
HMRC TIME TO PAY SERVICE
Have you spoken to HMRC about your tax bills, Corporation Tax, VAT, employers’ PAYE, Self-Assessment costs? No? then call them on the Coronavirus (Covid-19) helpline 0800 024 1222 or use webchat service.
CONSIDER A GRANT THROUGH THE CORONAVIRUS JOB RETENTION SCHEME (CJRS)
Employees on your payroll on 28 February are “furloughed” – put on standby. They don’t work but they do get paid by you, their employer with monies from the government. This is not a loan. It is a grant and does not need to be repaid. The state pays 80% of an employee’s salary up to a limit of £2,500 a month, plus the employer’s national insurance contribution and minimum pension contribution. If you are able to top up the employee’s salary, you can but you don’t have to. You don’t have to furlough all employees and it can be for as little as three weeks and up to three months – though this might be extended in the future. You can start and stop but each period must be for a minimum of three weeks.
If your staff have to stay at home to provide childcare because of school closures or they are “shielding”, you can furlough them. If you have already made staff redundant after 28 February, you can rehire and then furlough them.
You will need to follow equality and discrimination laws when choosing who to furlough, confirm in writing that they have been furloughed and retain that record for 5 years. We can help you with templates for your letters.
You will need to calculate the amount you are claiming – again we can help you with this – and claim the amount through your online PAYE portal. The CJRS grants will come at the end of April and are paid to you via BACS to your UK bank account.
TAKE THE BUSINESS RATES HOLIDAY
If you are a retail, hospitality or leisure business there will be a business rates holiday for the 2020/21 tax tear. You don’t need to do anything – you should see this in the council tax bill this month.
APPLY FOR ELIGIBLE GRANTS – THE SMALL BUSINESS GRANT FUND OR THE RETAIL, HOSPITALITY AND LEISURE GRANT FUND
If you have commercial premises and receive Small Business Rate Relief or Rural Business Rate Relief, you will be eligible for a one-off grant of £10,000 to help meet your ongoing business costs. This is known as the Small Business Grant Fund (SBGF).
If you are receive the Expanded Retail Discount (which covers retail, hospitality and leisure) businesses in England with a rateable value of less than £51,000 will be eligible for a cash grants of £10,000 or £25,000 per property under the Retail, Hospitality and Leisure Grant (RHLG) scheme
You do not need to apply. If you are eligible you should have had a letter explaining how to claim your grant.
If cashflow is still an issue and, given that payments under CJRS are not expected until the end of April, that may be the case, you can access the Coronavirus Business Interruption Loan Scheme (CBILS).
CONSIDER THE CORONAVIRUS BUSINESS INTERRUPTION LOAN SCHEME
CBILS provides loans, overdrafts, invoice finance and asset finance up to £5m and for up to 6 years. There are no upfront costs and lower initial repayments as the government covers first 12 months of interest payments and any lender-levied fees. The government provides 40 accredited lenders with a guarantee of 80% on each loan to encourage lending.
You find an accredited lender, and approach them through their website. They will need supporting information for the borrowing proposal. We can help you with that. Lenders may differ in their requirements’, but we expect them all to require a 12-month cashflow forecast and to show that your business has taken into account all the other steps we mentioned above before coming to the CBILS scheme. They will want to see your ongoing cost commitments and your expectations of trading conditions from July.
We are here to help. We may not have all the answers, but we are determined to help you understand your position more clearly and review your options – so please do get in touch and let us help you manage your cashflow.