Mitigating financial health during the coronavirus pandemic
As the coronavirus pandemic reduces your order book, increases debtors and blurs the future viability of your business, it is instrumental to act early to prevent your business from becoming insolvent. Mitigating financial risk during the pandemic can help withstand your business from dips in demand, increasing liabilities and challenging trading conditions.
In today’s guest post from Begbies Traynor, we take you through some of the ways your business can equip itself against further trading disruption.
Step 1: Tighten credit control measures
If your credit control measures are loosely defined, use this opportunity to speed up the payment process by implementing a fully structured credit control system. By enforcing tighter credit control, you can reduce the likelihood of bad debt which is likely to soar during the coronavirus pandemic due to a drop in consumer demand as a result of Covid-19 measures.
Step 2: Access government support
In response to the coronavirus pandemic, the government announced a series of financial support measures to help businesses during this uncertain period. The unprecedented events surrounding Covid-19 has resulted in a nosedive in profits for the food, hospitality and leisure industry following local lockdowns, curfews and stricter social distancing measures.
There are several Covid-19 business support measures which can help rejuvenate your business, from the Job Support Scheme to government-backed loans and more.
Step 3: Supercharge cash flow
If your business is on steady ground, however, it requires a cash injection to stimulate further business growth, commercial finance can enable you to take this step.
There are numerous types of commercial finance facilities tailored to your envisioned result, such as advancing invoice payments, funding equipment and bridging gaps between sales.
Step 4: Seek formal Insolvency Procedure
If your business is past the stage of showing initial signs of financial distress and requires professional support, a licensed insolvency practitioner can help advise on the best company restructuring and rescue solutions for your business.
Here are some of the available routes:
• Company Administration: If your business is viable, but requires major restructuring to successfully move on forward, company administration can help your business into recovery and avoid prospects of company liquidation
• Company Voluntary Arrangement: If your business is in serious debt and is no longer able to fulfil repayments to creditors as it is insolvent, a Company Voluntary Arrangement (CVA) can help you enter a payment plan with creditors
The route you take will be determined by tailored advice from your appointed licensed insolvency practitioner, taking into consideration the severity of the health of your business.
Step 5: Time to Pay arrangement
If you are struggling to maintain your tax liabilities to HMRC and require much-needed breathing space, submit a Time to Pay arrangement (TTP). A TTP is a formal request to restructure your tax liabilities into affordable instalments, typically spanning 12 months.
HMRC will only take your request into serious consideration if the proposed repayment plan is feasible. By exaggerating how much you can realistically repay, HMRC will reject your Time to Pay Arrangement request. Failing to keep up with payments as part of the TTP will also result in HMRC cancelling the arrangement, pushing your business into financial difficulty.
Taking the necessary steps early in the process can protect your business from seeking emergency finance to save it from collapse. The financial health of your business should be at the forefront of your agenda as your business can deteriorate quickly without seeking the necessary support at the right time. A licensed insolvency practitioner or business rescue expert can advise you on the best route to help steer your business on the right track.
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