There may be light at the end of the lockdown tunnel, and business is beginning to get back to some form of ‘normal’. But there is still a long road ahead for companies looking to find their feet in this new business landscape.
Cash is the beating heart of any successful small business. It’s a concern for many, even in normal times, but it has become even more challenging as a result of the coronavirus.
The Government’s intervention and support packages have done what they were designed to achieve (in most cases) – they have stabilised small businesses and given them more time to react and plan.
But what do small business owners do next?
To help business owners protect their businesses in a post-COVID climate, we have created an article to help you get your business back in check.
Review Your Business Plan
Is your business plan fit for purpose? Maybe you already have a business plan, and if you haven’t, you need to create one.
This will help you understand how your business has changed. For example, has the way you are doing business changed?
- Are you selling from a shopfront to now primarily online?
- Do you have costs that are no longer valid?
- Or are there costs that you will incur in the future?
You cannot determine the new business model will give you profit unless you get a business plan in place.
Understand how your business is performing
Make sure you can track the performance of your business.
If you regularly monitor your finances, you are far more likely to spot risks, problems, opportunities, etc., which will help you act quickly. It will also help you understand trends and changes in your business, which will support forecasting your future finances.
You should review your bookkeeping and reporting systems to ensure they can provide you with the information you need.
This doesn’t mean you will need expensive software or reporting tools. Your accountant can help you find a cloud-based bookkeeping package that works for you and can talk you through the different ways it can provide the financial information you need.
Establish Your Liabilities
As we come out of Covid, some companies will likely need to establish their liabilities. For example, businesses may have had to organise rent deferral, or you may have had to close down the premises.
It’s also worth mentioning that many businesses have taken on new debt due to the crisis. Whether it’s a deferral of VAT payments, bounce back loans, vendor loans or other funding, this will all need to be serviced and eventually repaid.
Forecasting can help you understand how you can manage these commitments alongside your day to day business.
But forecasting will never be perfect and will always involve assumptions, but it’s more important than ever that business owners look forwards.
Get your liabilities established and include them in your business plan.
Know your costs
Consider reviewing all of your ongoing costs to see if you can trim them.
In most businesses, staff costs are likely to be the single biggest expense. Furloughing is now well established, and, likely, you have already looked at this, but bear in mind the furlough money will stop, and you will need to incur more costs.
Other costs may be worth reviewing. Some may be fixed/contractual or relate to key services or advice and therefore cannot be reduced, but others may be more discretionary and stopped without impacting the business.
Look at ways to protect and predict future income
Look at ways you can protect your income, or at least understand how it may change. Talk to your key customers to see if that helps you understand their future plans.
Consider payment plans for outstanding amounts and recurring payments for future work to give you some certainty over cash flow.
It’s also worth considering how you may be able to diversify to develop new sources of income. We have seen innovation in some sectors, with businesses finding ways to access new customers online.
If you can protect elements of your income, you can start to track new trends, which will help you predict what may happen in the future more accurately.
Access support and funding available
Most small businesses have already accessed the funding they need, but it’s essential to keep track of Government announcements and continue to review the need for additional loan funding.
These loan schemes will be available for most of the year and could provide valuable working capital for those small businesses that have not yet applied.
Keep reviewing the business plan.
The final step is to keep reviewing the business plan. We have seen considerable changes in recent months, and we still have some way to go before we get back to normal trading conditions.
Ensure that you review your financial position regularly, look at the reporting from your financial systems and keep close to your business.
As above, cash flow forecasts are hugely valuable in difficult times, but they need to be as up to date as possible, so it’s worth updating them to reflect the latest numbers and any key changes in your business.
