R3, the insolvency and restructuring trade association, has released advice for businesses which may be affected by the COVID-19 pandemic.
1. Form an emergency response committee
Agree which of the senior staff will decide how your business responds to changes in circumstances, new information and guidance from the Government and the health authorities, and changing customer needs, and ensure you have the ability to bring everyone together when you need to.
Eleanor Temple, chair of R3 in Yorkshire and a barrister at Kings Chambers in Leeds, says: “Being able to discuss and agree what steps to take and when; allied with an ability to do this quickly is crucial in a time like this. An emergency response committee gives you access to all the areas of expertise in your business and enables you to get them together when you need them.”
2. Know your cashflow
Make sure you have your cashflow figures to hand. Maintain short-term weekly cashflow forecasts – ideally 13 weeks in advance – so you can identify and prioritise your outgoings.
Eleanor Temple continues: “Cash is king in business and knowing where you stand in terms how to manage your cashflow has never been more important. Make sure you’re on top of the details – outgoings, payment deadlines, etc. so you can keep yourself in the strongest possible financial position.”
3. Begin negotiations with suppliers or creditors
Now is the time to open negotiations with suppliers and/or creditors to see if they will accept new terms or deferred payment plans.
Eleanor Temple states: “With many businesses in state of confusion or struggling right now, an upfront conversation with suppliers and creditors will give you a clear picture of what you need to pay, who you need to pay it to, and when you need to pay it by.
“It may also enable you to renegotiate payment terms or amounts, which will give you additional funds to pay wages or stabilise your cashflow.”
4. Check your eligibility for Government support
The Government has announced a range of support measures for businesses, and a number of banks have also said they will look at business customers’ debts. Explore what you’re eligible for and how you can access it.
Eleanor Temple adds: “There’s a massive amount of support available right now for businesses of all sizes. For many it could be an enormous help – and for some it may be the fundamental difference between success and failure.
“The best first step is to research what’s available and understand how you can apply for any relevant support, so you know how and where you can access support, and the kind of timescales that are likely to be involved. And, it will payback many times over to get professional advice to guide you through the process.”
For more information on what the Government has available, visit their business support page.
5. Keep on top of employment contracts
COVID-19 has forced a huge number of businesses to change how they work. This may have meant a new way of working for your staff as well, which means you may need to rewrite your staff contracts to reflect the current climate and to ensure it covers any new duties, changed work schedules, or reduced benefits.
Eleanor Temple says: “If you’ve changed the way you do business, make sure your employees’ contracts reflect this, and that any changes have been discussed with them before they’re introduced.”
6. Keep communicating
Open and honest communication will be vital in maintaining key relationships for your business and allowing the people you work with to make decisions based on the best possible information.
Senior staff can be appointed as points of contact for key customers, suppliers and joint ventures, staff, and lenders, for day-to-day liaison.
Eleanor Temple adds: “Communication has never been more important to a business and its network of staff, customers and suppliers than it is now. Keep the channels of communication open between everyone and make sure staff know they can ask you for updates, clarification or help if they need to – and the best way of doing this.”
7. Check – and clarify – the terms of your insurance
Check your business’s insurance policy to see whether it includes a “force majeure” clause, which will provide compensation for lost income if certain conditions are met.
Duncan Swift says: “Business insurance, and the details of it and its various policies, will be crucial for firms from a legal and financial perspective. Check what yours covers and, if you can, have a conversation with your brokers or insurers to clarify any points you need to about your business and the situation it’s in.”
8. Seek reputable advice – the earlier, the better
If your business starts to struggle, early professional advice can make the world of difference. Directors or business owners should seek advice from an insolvency practitioner or reputable restructuring professional as soon as they start to see signs the business is in financial difficulty – or that this may be around the corner.
Eleanor Temple: “Any directors or business owners whose businesses are in difficulty or are starting see signs it will struggle should seek professional advice as early as possible.
“Early advice and early discussions with creditors give you a greater range of options to find and implement solutions to the challenges you face and enable you to make a considered decision, rather than a rushed one. Good advice also protects you from personal liability if the business fails.”
For local sources of advice, try the ‘Find a member’ tool on R3’s website.