Make and collect payments using Bacs, Faster Payments, Direct Debit and Open Banking. Manage cash flow, invoices, remittances and protect your business from fraud.
The terrible impact of COVID-19 is threatening the survival of many small businesses.
Whilst we don’t know how long these challenging conditions will last, there are practical steps you can take now to help ease the pain that you are going through.
Cashflow is critical
Managing cashflow is a top priority for most businesses as order books take a significant hit, and the effects of the virus impact workforce and supply chains.
Once you have done an initial forecast, revise it every two to four weeks to give yourself time to correct and plan around any critical liquidity bottlenecks. If your business is in a critical position, i.e. every pound and day counts, then update the forecast every week, without fail.
Review all of your outgoings and look for any costs that you can defer or even cancel. Negotiate with your suppliers where you can, particularly any large ones and ask for lower prices. If it makes sense, sign up to a longer contract to show your commitment – this is a two-way street after all.
Help from the UK government
The government has put various measures in place to support small businesses, a full list of what is available is here but includes:
Deferring VAT payments until 31 March 2021 and self-assessment payments on account until Jan 2021 – note you still need to submit the returns on time
A job retention scheme (commonly referred to as furloughing staff)
Self-employed income support scheme
Support for businesses paying sick pay
Business interruption loan
To help with your liquidity, you can take out an interest-free loan with the Coronavirus business interruption loan scheme which gives you access to term loans, overdrafts, invoice and asset finance of up to £5 million and for up to 6 years. This is the fastest way of getting a loan.
The government will also make a Business Interruption Payment to cover the first 12 months of interest payments and any fees from your banks, so you benefit from no upfront costs and lower initial repayments.
Eligibility for a £10,000 cash grant
Businesses that are in receipt of small business rate relief or rural rate relief should have received a local authority letter advising them on how to apply for a £10,000 cash grant. This relief is not a loan, so it doesn’t need to be paid back but is aimed at helping you meet ongoing business costs. Other grants are available for retail, leisure and hospitality businesses.
If you run a small business and are paying your rates but haven’t yet received a letter, then you should speak to your local authority. It is worth noting that some authorities have implemented an application procedure that could slow the process down, so the earlier you start the faster you receive the grant.
Chase overdue payments
If you have any creditors that have outstanding invoices, then chase them up as soon as possible. Chasing debt is often a tough ask for small businesses. It can be time-consuming, and some people find it awkward pushing a valuable customer about finance issues.
If you are worried about coming across badly and jeopardising the customer relationship, then use one of these time-saving email templates as soon as you have issued an invoice. Being polite but firm and mentioning Statutory Interest and other financial penalties that customers have signed up to under their commercial agreements can work wonders for prompting action from challenging late payees.
Other payment ideas
Early payment discounts are a great way to incentivise prompt payment, boost cashflow and improve your liquidity. They can be used to reward suppliers that are particularly critical to your business, or firms that you know are struggling themselves.
Encourage ‘pay it forward’ payments for repeat customers. You could ask for an upfront payment now if you are still actively trading, or as soon as you reopen for business. For example, if you run a hairdressing salon, you could ask customers to pay for their next two haircuts in advance. Combine this with a small discount to reward the customer, and you can strengthen the customer relationship too.
Make sure you are collecting payments in the most efficient way. Automate business processes where possible and use any downtime to identify potential technology solutions that offer long term benefits for how you manage your cashflow.
Many small businesses will need to get to grips with an effective remote working policy. By now, you will already have determined who can work from home - but pay attention to best practices so that your staff can operate as efficiently as possible.
Remote working can be hard for some staff or teams. Communicate regularly with your staff, prevent isolation with virtual get-togethers to make your people feel like they are still part of a team. Where possible, check-in daily to ensure the business has prepared for any cashflow related issues.
Ask for help
This is one of those rare times when your business takes secondary priority to your health and that of your loved ones.
The pressures of running your business will have magnified many times over the last few weeks with a knock-on effect on our mental health. Business owners need to take all the help that is available to them.
Paying the bills can be a major source of worry, but if you are in financial distress, then the HMRC’s ‘Time to Pay’ scheme might offer support with your tax affairs.
By retaining clarity about your business goals, having a financial plan in place, and focusing on cashflow, you give yourself the best chance of surviving this successfully. Do all you can today to ensure your business is well-positioned to start growing again once the country emerges from the current crisis.
Sometimes, the best way to tackle big problems is to break them into smaller pieces. For businesses, this applies to a pricing strategy that can be used to increase acquisition rates, boost growth and generate greater loyalty. What’s more, it helps to create a more stable and predictable revenue stream.
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