Coronavirus: How to ensure your business survives the current crisis

Travel, audit and tax director at travel specialist accountancy firm White Hart Associates, Nikki Spoor, says businesses need to take decisive action to survive

The Covid-19 coronavirus outbreak is an unprecedented crisis which is having a huge impact on business. Travel is one of the worst affected industries, with some firms seeing a fall in bookings of up to 50% in recent weeks.

Unfortunately, it is set to get worse before it gets better and the next few months will be very tough. Companies need to take decisive action to deal with the crisis.

Here are my top eight tips to ensure your business has the best chance of surviving the coronavirus crisis.

1. Cut costs

Take a long, hard look at your costs and cut back where you can, if only for a few months.

The current market conditions require quick and firm action, so don’t prevaricate in this area.

If you’re a small or medium-sized business (SME), you can think on your feet and adapt more quickly than larger companies.

Cash is king and those companies that can pay their bills during this crisis will be able to continue trading.

2. Consider staff and pay cuts

There’s a difficult balance between reducing overhead costs and losing valuable, experienced staff that you will need in the future. It is difficult and expensive to recruit good staff members but you may have to consider letting go some employees that are not seen as crucial.

More: Latest coronavirus updates

Prepare a skills matrix and identify crucial staff that have skills you will need in the future.

This is also the time to consider the future of staff who are not performing for your business – unreliable and unproductive employees need to worry.

Meanwhile, engage employees on how you can work together to avoid or minimise staff losses.

Some staff may want to reduce their hours, take a sabbatical or need a period of parental leave.

Consider a temporary across-the-board percentage pay cut, which may be preferable to job losses. Management would need to take the lead in this, with a ‘do as I do’ rather than ‘do as I say’ approach.

Always observe employment laws in the process and take external professional human resources advice if it is not available in-house.

3. Plan for remote working

Have you tested your technological capabilities and access to servers when working remotely? If not, do so now. Run a test asking a percentage of your team to work from home to gauge the impact on your business and workforce.  You need to be prepared for staff having their movements restricted and individuals being isolated.

4. Communicate, communicate, communicate

Don’t bury your head in the sand.

• Contact your suppliers and keep them engaged and informed. If you have a good track record of paying them, there should be enough goodwill for them to help you, perhaps by delaying invoices or allowing staged payments.
• Maintain dialogue with regulators – they always advocate frank and transparent communication. We are all consumers and consumer protection is of the utmost importance, but it always pays for you to seek independent specialist regulatory advice when approaching regulators. They will have only two priorities – avoiding consumer damage and their position. You also, not unreasonably, will want someone to factor in your aspirations and what is best for your business. This is where excellent third-party advice, from professionals that understand and know your regulator, is vital.
• Merchant acquirers, travel bond obligors and insurers will all be feeling exposed in these difficult times. You may not have heard from them for some time, but they will be concerned. Talk to them if they approach you.

5. Get your financial reporting in order

It’s essential to have a robust financial reporting and cash flow model that is flexible as the situation changes. Travel regulators, insurance and bank risk underwriters and merchant acquirers live by the ‘power of the spreadsheet’. They will want to see evidence that you have a clear plan and can make tough decisions where necessary. If you do not have staff capable of such modelling, ask your accountants for templates to assist you.

6. Take advantage of government support

Government initiatives won’t solve all your problems, but the following budget measures are helpful:

• Statutory Sick Pay (SSP) is to be paid from the first day of absence, not the fourth day, where people have the virus or have to self-isolate, or care for people with the virus.
• Support through Universal Credit and Employment and Support Allowance for self-employed people and others not entitled to SSP.
• Full funding of the cost of two weeks’ SSP for small and medium-sized employers whose workers have claimed SSP as a result of Covid-19.
• Extension of business rates reliefs: retail, leisure and hospitality businesses with rateable values up to £51,000 will be eligible for 100% relief in 2020/21, and a £5,000 discount (up from £1,000) for pubs with a rateable value below £100,000.
• Small businesses already eligible for 100% business rates relief will receive a grant of £3,000 to help with business costs.
• Businesses and self-employed individuals in financial distress will be able to negotiate ‘time-to-pay’ arrangements with HMRC without incurring late payment penalties.
• The Business Interruption Loan Scheme – banks are planning this now and there should hopefully be structures in place early next week.

Meanwhile, contact the local council rates department to see if you can access small business grant funding and contact the local council if you are having difficulty paying rates.  

7. Use the HMRC helpline

If you need help, contact HMRC, don’t wait for them to contact you.

Call the COVID-19 helpline on 0800 0159 559 to organise extra time to pay tax. This has to relate to current liabilities which are first quantified and can include VAT, PAYE/NIC and Corporation Tax. Make sure you know what you owe before you ring them.

If you are a large company, try to cease your instalment arrangements for the current year and look to see if payments on account can be refunded.  There are no interest charges or penalties on this, so do not miss out.

8. Be aware of your responsibilities

Directors must take their responsibilities seriously, and minute and document all their processes and decision making.

If, at a later date, the company becomes insolvent, you will need a robust paper trail as to what happened and to reflect that you have carried out your fiduciary duties correctly. Such records will show that you took necessary and appropriate actions and also be able to demonstrate at what stage you realised the company was unable to meet its liabilities.

Seek professional assistance and ensure that you do not leave yourself personally vulnerable or liable because of your conduct. Be particularly careful about taking any actions that would indicate you have preferred yourself or any other creditor, particularly a related party, over other creditors of the company.

You should be able to obtain an initial free consultation from most reputable insolvency practitioners. Your business professionals and advisers are critical at this time.