As the UK attempts to free itself from lockdown and what some expect to be the worst economic collapse in 300 years, business owners will need a clear strategy to help them emerge into what will, for many, be a very different economic landscape. 

For business owners who have survived so far, the hard work really starts now. How do you get your sales and, most importantly, your profitability, back to where it needs to be? What is your plan to generate cash and pay down the debt accumulated through the survival phase? 

To find out, we asked some of our Associate Network members to provide their point of view and suggestions around how business owners can ensure their companies survival throughout the covid-19 lockdown crisis. 

Rethink your Business Model 

We believe that the business’ that will survive Covid in the long term will be the ones that have ‘stepped back’ and seriously looked at what works well for them and what doesn’t; target customers and markets, processes, purchase channels, people, management/leadership and so on.? The ones that will fail will be those that blame everything on Covid-19. 

The successful companies will have ‘pivoted’ and started to sell new products and services with different terms of trade. Whether they are a gin distillery now providing hand sanitisers or a clothing business now selling face masks, the change creates opportunities to change how they price, bill and get paid. 

Considerations include looking carefully at your gross margins – don’t be a busy fool, engage the public – donations of some of revenue to charities attracts the general public interest, change your minimum order quantities to make it more affordable, consider selling on sale or return? – a shared risk with your suppliers, and getting paid more quickly with cash on order, particularly important with new customers. 

When we eventually go back to a post-lockdown state of ‘normality’, the business world is going to be leaner and fitter and what used to be normal will no longer be the case.?Tony Williams?&?Gary Jesson 

“If a business can’t survive the next 6 months, there is no next year” 

It’s important to plan for both the short and longer term. Having a longer term (3-5) strategic plan provides a vision and a road map for a business in terms of the markets that it wishes to operate in, its products, pricing, sales & marketing and culture. 

However, many businesses never get to the long-term plan due to running out of cash. Therefore, it is vital that a business understands the here and now to ensure that the business has the cash it needs to survive to fulfill its longer-term strategic vision. Simon Finbery 

Maintain a 13 Week Cashflow Forecasting 

Keep a rolling 13-week cash flow forecast to identify any funding gaps. On the side of caution when setting expectations for receipts from customers.Identify key suppliers and make sure you prioritise paying them if you have to stagger payments – don’t just pay those vendors that are making the most noise. When putting the forecast together, don’t forget to allow for any liabilities, such as VAT or PAYE that you may have deferred, as these will need to be paid for at some point. 

If the cash flow highlights possible gaps in your funding, consider what funding is available to you (don’t just think about bank loans, consider things like invoice discounting or lease financing as these may be more cost effective) and make sure you allow time to get your application in and for the lender to go through its’ approvals process. Consider pulling together the documents a lender might require (e.g. recent bank statements, annual accounts and up to date management accounts) so they are immediately available, and you avoid wasting precious time. Andrew Sugden 

“Costs are a certainty, income is an uncertainty” 

Businesses typically put together an annual budget covering both income and costs. There is a danger that once the cost budget is signed off the expenditure will be made “because it is in the budget”. The budgeted income may not materialise though, as customers go to competitors or simply the market conditions change or do not play out as expected. 

Therefore, investment decisions always need to be constantly re-evaluated, thought through and challenged before expenditure is fully committed, ensuring the associated income projections remain realistic.?Simon Finbery 

Reviewing your Cost Base 

Make time to look at expense items the business is incurring (either using the profit and loss account or recent bank statements) and identify any that aren’t critical to the business. Find out what notice period you are on (if any) and either cancel the service or give notice you intend to either cease or reduce the level of purchasing activity. 

For those cost items you can’t live without, consider talking to the supplier to see if they can offer you a better deal. 

If you are considering either reducing the hours staff work, their pay and benefits or making people redundant, make sure you take professional advice before acting, as mistakes in this area can be both expensive and time consuming to correct. Andrew Sugden

Don’t be Afraid to Ask 

Just because a contract for services is in place doesn’t mean that the supplier will not be amenable to a price reduction. I had a client that had placed two thirds of their staff on furlough and, despite a strong reluctance to ask, the IT provider readily agreed to a £2K per month cost reduction for the duration of lockdown. Other suppliers have agreed to extended payment terms and payment holidays. Remember many suppliers need you as much as you need them! Tony Williams 

Enhance your Credit Control 

Make sure your business’ payment terms are clearly laid out and ensure that your accounting records are up to date, so you have an accurate picture of who owes you money and are aware of existing balances if the customer is looking to purchase more. Consider using an outsourced or part-time credit controller to help you save time and money in this area and if you don’t already have the appropriate resources in-house to help collect what’s due to you. 

If you don’t currently credit check customers, consider introducing this into your due diligence process, especially for material transactions or new and unexpected customers – ask yourself why have they suddenly approached me. Also, consider taking credit card payments if you don’t already have this facility, to make it easier for clients to pay you.- Andrew Sugden 

Improve your Communication 

For employees, the furlough period is especially difficult as they don’t know for how long it’s likely to last, as nobody knew for certain how long the more severe aspects of the lockdown and business slowdown was going to last. A method that one of our clients adopted to keep the communication open was to organise twice weekly “coffee mornings” via Teams to all staff. The CEO took part in 95% of these so he could answer questions that staff may have had and also to keep the teams morale going. 

Due to furlough restrictions “work” was not an acceptable topic of conversation but items such as lockdown haircuts, re-organising the kids’ Lego collection and numerous garden and DIY projects were all good subjects that came up. 

Outside of employees, although many suppliers and agencies also reduced staff numbers and working hours, we certainly found that they all appreciated some communication around business activity and especially payments. Talking to the suppliers certainly helped get long term deferrals on payments (HMRC) or just slightly longer terms. 

As always with this type of situation, silence is not the way forward.- Ian Wint 

Engage your Stakeholders 

Talk to your stakeholders, share your worries and excitement about what could be the opportunities to encourage an increase in sales activity. Lift your eyes to the horizon. Make time to see beyond immediate crisis management. Ask your stakeholders (customers, staff, suppliers) what they want from you and what you can provide them. Develop those ideas, don’t shelve them but encourage lateral thinking. Challenge the status quo.- Nick Harding 

Have a Sounding Board 

This is a lonely place and time for business owners. They have set up their business with a passionate vision of what customers need, probably risked their career by leaving a stable position to purse their dream and put reputation and money on the line to get to this point. So, talk to someone who understands what you’re going through, not only fellow business directors or your partner, but somebody on the outside, a fresh set of eyes, who may have experienced similar business crisis and will challenge your ideas and come up with ones you hadn’t thought of before.- Nick Harding 

EFM is here to support your business! 

For many SME’s, the current pandemic has caused workloads in finance teams to shrink, so the resource needs to be re-evaluated and full-time staff may no longer be needed; this has accentuated the need for strong financial discipline to help owners move from survival to prosper. EFM is on hand to provide your SME business with expert skills to help you start growing, manage your working capital, help you reduce the ‘pile of debt’ built up through the pandemic and create a survival plan. 

Business owners can get the bespoke support they need by insourcing their finance and accounting services to EFM on a fully flexible basis –starting from as little as an hour a month. Our UK and Ireland team of experienced and multi-sector finance professionals range from high level Finance Directors & Financial Controllers, to support functions, such as Bookkeepers, Credit Controllers & Payroll Managers. 

To find out more around how EFM’s tailored financial management services can benefit your company, please download our informative brochure or get in touch with the central team directly via [email protected] or call?01582 516300 to set up your free initial consultation.