Covid-19 has hit many businesses hard. Many of us are working long hours to keep solvent: others are failing through no fault of their own, whilst a few are flying. The reason is simple: As a nation, we were not spending during lockdown. This means limited or non existent cash flow for impacted businesses.
“Cash combined with courage in the time of crisis is priceless” Warren Buffett
Cash flow is a key factor in a business’s potential for long-term success as cash, albeit in a bank account, is needed to pay salaries, rent, and other business expenses. Every company is going to have periods when things are not running at full potential – such as during lockdown – however, without cash on hand, companies are forced to drastically downsize, reduce employee numbers, move out of offices, and if things do not pick up, may have to declare bankruptcy in order to pay for any fixed expenditure.
Monitor, retain and increase your cash reserves
Careful management of your cash gives a business flexibility and increases its ability to survive.
TOP TIP #1: Look at how you can extend credit terms with your suppliers. Delaying payments will help you maintain a strong cash position within your company.
TOP TIP #2: Monitor your debtors and ensure that their invoices are paid on time. Employ credit control processes for any large outstanding amounts such as agreeing payment plans for clients that are genuinely struggling to pay.
TOP TIP #3: Review other ways to access cash for your business, for example, in the form of loans, grants, savings etc.
Every business needs cash
Business is so important to the economy that the Government has put in place a number of grants and support measures to help boost the cash flow of both directors and their businesses through this really tough trading period.
We’ve often shared these measures and you can find a full list on the HB website here. However, we felt it was worth highlighting a few of the options that will make a big difference to your cash flow.
Recovery Loan Scheme
The Recovery Loan Scheme helps businesses all sizes to access loans and other kinds of finance so they can recover after the pandemic and transition period. If you have a UK-based business and can show that your business would be viable were it not for the pandemic, then you can access up to £10 million. The actual amount offered and the terms are at the discretion of participating lenders. You are liable for 100% of the debt yet 80% is guaranteed by the government.
The scheme is open until 31 December 2021, subject to review, and you can access a list of participating lenders here.
HB advice: if you take a loan be aware of the need to repay it. Talk to us for guidance ahead of signing on the dotted line.
Local grants for businesses with premises
Businesses that were required to close due to national restrictions imposed by the Government may be eligible for the LRSG (Closed) Addendum schemes. These are grants given by local councils. Your business has to be based in England, occupy premises on which you pay rates and be unable to provide your usual in-person customer service from its premises – this does include pubs and restaurants who are providing a take away service.
VAT reduction for hospitality, accommodation and attraction businesses
You may be eligible for a 5% reduced rate of VAT until 30 September 2021 if your business is in the hospitality, hotel or holiday accommodation sectors. From 1 October 2021 to 31 March 2022, the reduced rate of 12.5% will apply. Find out if your business is eligible for VAT reduction.
There may be other support available to your business. Use the governments’ Coronavirus financial support finder tool to see what help you can access.
Remember that we are here to help: we’re experts in the support available to all businesses, no matter your business size or sector. If you would like to talk about how we can help you and your business with cash flow or any other financial matter, please feel free to contact the team on 01992 444466. We’re accountants for business and we’re here to help you survive and grow
The information contained above is for general guidance purposes only. Whilst every effort has been made to ensure the contents are accurate, please note that each individual has different circumstances and it is essential that you seek appropriate professional advice before you act on any of the information contained herein. HB Accountants can accept no liability for any errors or omission or for any person acting on or refraining from acting on the information provided in the above
Read our latest blogs below
- SEISS 5 grant applications to open in late July (Self-Employment Income Support Scheme)
- Act Now! Super-deduction – a very attractive £25m tax break on capex investment
- How to determine if your worker is employed or self-employed following the new IR35 rules for the private sector from April 2021
- Cash is King – Here’s how to generate cash right now
- Finance for School Leavers in England – Your Need to Know Guide