Guest Post: Lessons in financial survival

Lessons learned from foot and mouth outbreak are showing how businesses can adapt to the coronavirus impact

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Almost 20 years ago Britain was in the grip of a health crisis, but instead of confining thousands of people to homes and hospital, it shut down the nation’s farms and devastated the rural and tourist economy.

As a front-line advisor during the 2001 crisis, Brent Treloar the business development manager for the Cornwall & isles of Scilly Investment Fund (CIOSIF), shares the financial survival approach adopted by the national Business Link service during that time.

This also includes advice on the UK Government’s current key financial support measures initiated to deal with the Coronavirus crisis. The key strategy for those businesses severely impacted was to adopt a ‘business hibernation’ approach and ensure as much cash flow as possible was preserved in the business. To achieve this, 5 key steps were recommended:

  1. To stay in business, businesses will likely have to consider a severe reduction of their costs. A thorough assessment of all costs needs to made and all but vital operational costs should be cut…immediately! Any overheads should sought to be deferred for at least three months, including rents, insurances, existing bank loans, mortgages, lease and hire purchase arrangements.
  2. Businesses will quickly find they owe more than their available cash. Therefore, they must prioritise what they pay. Only paying obligations that will shut them down if they don’t pay them and ‘trickle’ pay others. Also seek to accept trickle payments from outstanding debtors. Most businesses will be willing to work with together if they believe that eventually everyone will get paid what they are owed.
  3. Plan the cash flow carefully. Businesses should assess the exact cash they have and any receivables they expect to collect (remembering many debtors will also delay in paying). Build a detailed cash flow plan that lays out who you will pay, when you will pay them and how much you will pay them. Add in any support such as rateable grants and furloughing support for staff. Build your cash flow based on revenues that show a 3-6 month dip or shut-down, followed by a modest recovery and then returning to normal at the 12 month point.
  4. Communicate often and regularly with all staff, creditors, debtors, other suppliers and finance providers about long-term plans post crisis to stay in business.
  5. Plug into all the Government and bank support to ensure sufficient cash flow support finance is available to see them through the crisis. The Chancellor has set out a package of measures to support businesses including:
  • Coronavirus Job Retention Scheme
  • Deferring VAT and Self-Assessment payments
  • Self-employment Income Support Scheme
  • Statutory Sick Pay relief package for small and medium sized businesses (SMEs)
  • 12-month business rates holiday for all retail, hospitality, leisure and nursery businesses in England
  • Small business grant funding of £10k for all business in receipt of small business rate relief or rural rate relief
  • Grant funding of £25k for retail, hospitality and leisure businesses with property with a rateable value between £15k and £51k
  • Coronavirus Business Interruption Loan Scheme offering loans of up to £5 million for SMEs through the British Business Bank
  • New lending facility from the Bank of England to help support liquidity among larger firms, helping them bridge coronavirus disruption to their cash flows through loans the HMRC Time To Pay Scheme

By understanding and accessing all the support available to their business and workforce through this global health emergency, business owners will maximise their chances of business survival.