When Boris Johnson announced the UK coronavirus lockdown on March 23, 2020, he effectively shut down the economy.
While there have been interruptions in the past – and full-blown crises – British businesses have never seen anything like this. The economy has been put into cardiac arrest, leaving firms wondering how they will endure the hiatus until the authorities decide to resuscitate it.
Fortunately, government assistance and business relief are forthcoming, which should help to tide the majority of firms over for a few weeks. But things will still be tough for firms, even with massive official support. How can you manage your small business finances in the interim?
Sign Up For The Coronavirus Job Retention Scheme
Chancellor Rishi Sunak, the treasury, and HMRC know that the restrictions on business and daily life will take a terrible toll on companies and employees throughout the UK. For that reason, they’ve unveiled a vast – and sometimes dizzying – array of financial measures designed to support firms through this challenging time.
One of these is the “Coronavirus Job Retention Scheme.” The idea here is to provide firms with enough cash to allow them to continue paying 80 per cent of furloughed workers’ wages. Any employee on a “leave of absence” due to current shutdown can receive the payment, up to a maximum of £2,500 per month.
The scheme is currently open to any UK employer who began a PAYE scheme on or before February 28, 2020, so apply today if you qualify.
Defer VAT Payments
In ordinary times, companies collect VAT from the sale of goods and then pass receipts onto HMRC. But with so many firms currently facing cash flow crises, the government announced that it would defer the need to pay this tax for three months – possibly longer.
VAT-registered businesses, therefore, have a couple of options.
Either they can defer payments until a later date if they owe VAT between March 20 and June 20 or pay VAT as usual if they are not in financial distress. Deferrals fall under the government’s new “Time to Pay scheme.” Be sure to check it out.
Delay Your Self Assessment
If you’re due to file a self-assessment on or before July 31, 2020, because you’re self-employed, then you may have the option to defer any payments on account until January 31, 2021. If you’re not sure how this works or want to know more, get in touch with chartered accountants, like BrooksCity, to find out more.
Apply For Sick Pay
Even businesses that remain open may find it challenging to provide workers with sick pay if multiple people are off work with Covid-19 at any given time.
For that reason, the government has brought forward legislation that allows employers to claim back statutory sick pay (SSP) from the government. This benefit refunds up to two weeks of SSP per employee IF they have to take time off work because of Covid-19.
So that’s a brief introduction to the official channels for help during the coronavirus crisis. But what else can you do, besides relying on the government?
Focus On Your Cash Position
When it comes to dealing with a crisis, having cash in the bank is vital. If you don’t have money to pay employees or suppliers, relationships can turn sour. For that reason, you may need to go on a temporary cost-cutting mission to find savings where possible while you await government assistance. Cut non-essential business services if you can.
Other methods to maintain liquidity include:
Holding onto VAT for the next three months to boost your current reserves
Using government assistance to pay furloughed worker salaries
Switch To Revenue-Generating Activities
While the lack of physical proximity between businesses and their customers is making life difficult, that doesn’t mean the end of opportunity. Many executives are finding ways to adapt to the current environment to keep their operations ticking over until normality returns.
Already we see numerous businesses switching their business models. Retailers are hiring thousands of people to facilitate massively expanded online delivery services. Factories are turning from making vodka to hand sanitiser. Textile businesses are altering their production methods to make masks. Educators are moving online.
Focus On Keeping The Core Of Your Business In Tact
Eventually, the economy will pick up, and demand will return to normal. When that happens, you want your business to be ready and raring to go. It is vital, therefore, that you maintain your assets wherever possible, including your colleague and supplier relationships. You’ll need these people when the inevitable recovery arrives.