Now is undoubtedly one of the most challenging and uncertain times to be a small business owner. As the response to COVID-19 continues to evolve, businesses up and down the country – across all sectors – have been forced to take radical steps to continue operating. Some have completely pivoted their business models in a matter of days, while others are now juggling running a business with home-schooling their children.
As the backbone of our economy, small businesses have already shown incredible resilience and ingenuity during these tough times. However, we know that many are still worried about the collateral damage of COVID-19 and are unsure as to how they can best insulate their business finances.
Here are some of
the ways businesses owners can minimise financial losses:
- Look into government loans and
schemes
There have been a raft of new government initiatives to support small businesses and self-employed. The details are constantly being added, and the best way to keep up-to-date with them is going to GOV.UK.
If you require a cash injection quickly, speak to your bank about the temporary Coronavirus Business Interruption Loan Scheme (CBILS). It offers interest and fee free loans provided as a normal term loan, an overdraft, invoice finance or asset finance. It’s the fastest way to get a loan.
Another government initiative is to reimburse 80 per cent of furloughed workers’ wage costs, up to £2,500 a month for each employee. The scheme will also cover furloughed workers’ National Insurance and pension contributions normally paid by employers. And significantly, those made redundant after 28 February can also be re-employed and placed on furlough.
Furloughed workers are those who are unable to work because their places of work have been forced to close, or are struggling financially because of the coronavirus. Importantly, furlough is a form of temporary leave, it is not a redundancy.
The government has also deferred the next quarter of VAT through to the end of June and the next self-assessment payments to January 2021 for the self-employed, which should alleviate some pressure.
Don’t feel that you need to handle this tough situation alone. If you are unsure what resources and loans you are eligible for then seek professional advice. The Small Business Commissioner’s office and Federation for Small Businesses are there to help and can direct you to appropriate local support.
- Prepare for a realistic worst-case scenario
If you haven’t done so already, take the time to consider the realistic extent of the risks to your business. It’s prudent to have a plan in place for how you would continue operating with up to half of your workforce off sick at any one time.
Preparing a written business continuity plan has never been more important. If you as the business owner gets sick and needs to self-isolate for at least two weeks, having a strategy in place that your employees are aware of and understand ensures minimal disruption. Creating a chain of command among team members to keep the business moving forward without you or integral members of your staff is key to this.
- Embrace digital
E-commerce and other digital tools that previously may have made life slightly easier could now be essential to the continuation of your business.
If you sell products, now is the time to ramp up your online presence. Be unashamed about quickly releasing a ‘minimum viable’ online shop front if you’re only just setting up. Customers are likely to be understanding, and would rather be able to support you quickly than wait for a perfect looking landing page.
Consider running special online-only offers to drive more customers to your virtual storefront. If you’re a service-based business, offering e-gift cards with long-term expiries is a great way to keep revenue flowing in and customers on call.
If your business hasn’t yet tapped the online market, look into web-based marketplaces like Etsy, Amazon, or eBay to quickly and easily launch and sell your products. Tap into local markets using Facebook Marketplace, Shpock, or even Gumtree. Above all, choose the online marketplace that makes the most sense for your products and services, will draw the largest crowd and therefore give you the best return.
- Track your income and expenses
Cash flow can be challenging for small businesses at the best of times, but it’s never been more important to have a view of your income and expenses all in one place. You may even find that things aren’t as bad as you fear once you take stock and plan out the minimum turnover you will need, and maximum expenses you can cut in the short term.
One source of income that is often overlooked is outstanding customer invoice payments. Our research found that on average – at any given time – an SME is waiting on nine outstanding payments; in theory this is accessible cash that you should be able to tap into instantly. If you’re unable to get your customers to shorten payment terms at the moment, consider whether invoice financing could be the right solution to provide short term cash against the value of outstanding invoices.
- Make use of your network and
loyal customers
Don’t be afraid to use your contacts and reach out to those who might be able to help. For example, if you work with a venture fund, a board of advisors, a network of angel investors, then they may well be able to help you work through this. A clear ask, planned ahead, to cover a defined shortfall in response to this well-recognised exceptional circumstance, made from an otherwise viable business, is likely to be received well.
On the other hand, if you are struggling to pay suppliers then don’t be afraid to ask them for longer payment terms. Humans are the heart of any business and being transparent and realistic about payment solutions and pay dates can go a long way. Everyone’s feeling the pinch and suppliers should understand.
And of course, if you’re unsure or overwhelmed then consult your accountant or bookkeeper. Speak to them as soon as possible and ask how you can make up losses or reallocate budgets to get workers paid on time.
