It’s a challenging time to be in business, whether you’re part of the supply chain or a customer-facing retail business.
With all the challenges of social distancing and people being encouraged to stay home, it’s difficult enough to bring in both your staff and your customers and try to keep your business trading under some kind of normal situation, but above all that you’re also faced with the financial fall-out of the ongoing Covid-19 crisis.
Recognising that the majority of businesses in the country need financial assistance in order to survive the crisis the government have announced a number of measures over recent weeks to help businesses mitigate the financial effects of coronavirus.
However, the amount of information out there regarding the financial measures is bewildering and it’s hard to understand what support there is available for your business, especially if your accountant is busy trying to ensure their own businesses survive the crisis rather than pointing you in the right direction.
The headline measures announced by the government are:
Job Retention Scheme: aka ‘furlough’, is the initiative that allows you as an employer to maintain your workforce even though you might not have any work for your employees to do, or cash to pay them with. The government will pay the business a grant equal to 80% of the employees salary upto a maximum of £2,500 per month plus any employer on-costs. An employee is eligible to be furloughed as long as they were employed by you on 28th February, with the earliest date they can be furloughed being 1st March.
You run the payroll as normal, and process the employees’ pay including any pension contributions. Your business will then apply for a grant to be repaid back from the government by accessing a portal that is due to go live on 20th April, with first payments to be made to business before the end of April, and certainly in time for the month end. It is important to note that employees that are on furlough must not work for the business during their furlough period.
VAT deferral scheme: If you’re a UK VAT registered business the government has announced that any payment due between 20th March and 20th June can be deferred until a later date if you wish. I would advise cancelling your VAT direct debit mandate to ensure the payment isn’t collected in error. You still need to file your VAT return during these dates as normal.
Time to Pay: HMRC have increasd the number of staff working n their Time To Pay team, so if you’re unable to pay either your PAYE contributions or your Corporation Tax either you or your accountant needs to contact HMRC to arrange a time to pay agreement.
Businesses eligible for Small Business Rates relief should, by now, have started receiving £10k grants paid directly from their local councils. You may need to check with your local council to see if you need to fill in an online form so that they have your business bank details, but their shouldn’t be any other requirement on your part to ensure you’re paid the grant. Again, your local council will automatically apply the discount with any need for you to take action. This relief could be worth up to £25k for your business.
If you have a pet shop then you could well qualify for the enhanced rates relief aimed at the retail sector.
Coronavirus Business Interruption Loan Scheme (CBILS): In recognition that business will still need working capital the government has announced CBILS in order to release funds to businesses. There has been much criticism, both about the checks required by businesses in order to qualify as well as the speed with which funders are responding.
However, being prepared for the questions you’re likely to be asked will stand you in good stead. Ensure you have your latest set of filed accounts to hand; has your latest management accounts as well as forecast for the months ahead; and ensure the forecast shows you’ve taken all the other initiatives into account.
Over and above the financial measures announced by the government, you should use this time to look at the tasks you’re generally too busy to deal with.
This could include looking at different ways to market or building on anything that has worked well for you during this crisis. For example, if you’re a retailer who has had to build a rudimentary system in order to sell and deliver your products online to local customers, what do you need to do to improve and make the system permanent.
Have any previous inefficiencies in the business now either come to light, or been eradicated because of the situation? If so, how do you ensure the old inefficiencies aren’t simply put back in place once the crisis is over.
Now would also be the ideal time to implement new business software. Cloud-based accounting systems such as Xero can be linked seamlessly to a whole manner of other software solutions for e-commerce, stock handling, online payments, and customer relationship.
Not only are these solutions often a fraction of the cost of older legacy systems but they can introduce huge efficiencies into your business.
So, whilst the current situation is obviously critical across the economy, accessing the government initiatives as well as planning for the future will put your business in a much stronger position once this crisis comes to an end.
Martin Bown is the founder & MD of My Management Accountant