Four key things for businesses to consider during the current crisis

The current business environment is particularly challenging, especially in the world of SMEs. With various unforeseen circumstances emerging at speed, it is important for companies to observe four core aspects during uncertain times. 

Roger Wood, Midven’s Director and MEIF Fund Principal spoke to Business Cloud last month about these aspects. In this blog, we explore these in greater depths.     

Understand your cash flow options

Cash is king is often the mantra for small businesses, and it has never been more critical than at this time. The reality is that most companies are going to see a decrease in sales opportunities in the short to mid-term as their customers focus on personal issues and the survival of their own businesses. This means that purchasing decisions will inevitably get delayed or quite possibly cancelled.

As cash inflows become limited, a priority for businesses has to be to minimise its outflows. This will likely involve making some difficult decisions on costs, staff and projects. There can be no sacred cows in these scenarios, but for most businesses there are some quick wins, particularly with the help that the government is providing – a helpful summary of which can be found here.  

A summary of some of the key things to consider include:

  • Delay VAT and PAYE/NI payments in line with government guidelines
  • A 12-month business rates holiday (if applicable) 
  • Sales discounts to keep the cash coming in
  • Chasing debtors and offer incentives for early payment
  • Delaying payments to creditors where possible
  • Freezing capital expenditure
  • Cancelling non-essential spending – costs should be gone through on a line by line basis
  • Putting a hold on staff recruitment
  • Speaking to the landlord about rent deferral

Consider your funding options 

Intrinsically linked to the issue of cash flow is whether the business can secure funding to support it through this challenging period. The starting point should be to speak to your existing bank, lenders and investors. If the business has existing facilities, e.g. invoice discounting, then draw these down to the maximum available. Again, the government is seeking to provide support to SMEs through the Coronavirus Business Interruption Loan Scheme (CBILS). This can be accessed through many of the mainstream lenders, perhaps even the business’s existing bank, or a broad range of other institutions – a list of which can be found here. 

All funding providers will still be open for business despite the environment. While this is undoubtedly true, companies need to try and focus its efforts on the most likely sources of funding. Bear in mind that in the short-term investors may well be distracted by existing portfolio issues. So, as discussed above, existing lenders and investors should be the starting point for support. They will not want to see a business they invest in fail, so are more likely to provide funding than a provider the company has not engaged with previously. Government-backed schemes are also likely to be a good source of funding at this time. For example, the criteria for the CBILS scheme has been set to enable lenders to provide financial support to businesses that may not currently meet lending metrics but can demonstrate sustainability over time. It should also be noted that the security requirements for smaller loans under this scheme have been further relaxed since the programme was launched.

Investors, whether a venture capital firm or a business angel, will continue to invest in strong long-term investment opportunities, even in challenging times. Albeit they may be somewhat more selective over sector preferences. Regionally focused funds, such as the Midlands Engine Investment Fund are likely to continue investing actively over the coming months. Though bear in mind, more than ever, businesses should be realistic about their valuation expectations when engaging in such discussions.

Review and efficiently manage operations

A detailed review of staffing levels should be undertaken across the whole business. Identify which roles are absolutely key to the ongoing viability of the company. First and foremost, keeping the business alive has to be the priority, followed by maintaining a suitable level of operational capability to trade at sustainable levels. In many cases, difficult decisions will inevitably have to be made with regard to reducing staff numbers. In this circumstance, businesses should explore the Government’s Job Retention Scheme whereby staff can be furloughed with 80% salary (up to £2,500 per month) paid via an HMRC grant. Be aware that this will represent a change to staff employment terms and contracts; therefore, it is recommended that businesses seek appropriate legal advice in implementing this scheme. The obvious benefit of this programme is that it will allow companies to retain employees and enable them to return to normal operations as quickly as possible once the current situation has passed.

By now, nearly all businesses will have implemented some form of home working. Indeed in several sectors, offices and workspaces will be closed, enforcing the move to home working. Therefore, investment in some computer equipment and accessories may be necessary to enable operations to function efficiently. 

It is essential to have clear, established reporting lines (something most well-run businesses already have). Ensure that your staff understand who to report to for and how to prioritise activities. There will be a lot of ‘noise’ in the current environment, so, implementing key focuses and allocating these appropriately will be critical to successful operation in uncertain times. 

Communication and Staff Wellbeing

It is important to recognise that this is an unusual situation for all members of your business. Many will be fearful for their jobs and futures and may struggle with living and operating in isolation. Being considerate of everyone’s mental health at this difficult time is essential, especially as all businesses will want as many of their existing team to return to work as normal once the current crisis is over.

This can be managed through regular, transparent communication. Ensure staff know what is happening and how challenges are being navigated. Maintain this by holding regular virtual team meetings as well as regular one to one conversations. The importance of maintaining strong lines of communication across all levels of the business cannot be overemphasised. For most thriving businesses, this will be the norm, albeit in the current environment through virtual means.

Communication should not just be work-related. Numerous businesses are operating virtual happy hours on a Friday evening. A video chat with a drink in hand can certainly raise spirits! As can setting up silly challenges for people to undertake in their break times, whereby they can share pictures and videos of fun activities. These kinds of things are good for morale and the general health and wellbeing of staff, something we all have to take responsibility for in these tough times – we are all in this together.

Roger Wood

Midven Director and MEIF Fund Principal

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