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Managing the road to recovery – are you suffering from restart anxiety?

During the COVID-19 pandemic, a £407 billion support package has enabled many UK businesses to maintain a healthy cashflow and stay afloat. However, with Government support soon to end, many owner managers may be experiencing ‘restart anxiety’ and may be postponing important decisions required to future proof their businesses. Owner managers can take control of their fortunes and increase their likelihood of performing successfully through effective scenario planning and learning to spot financial red flags. They should also investigate their eligibility for the Government’s new Restart Grant, which could provide them with a much-needed cashflow boost over the final few months of lockdown restrictions.

Signs of trouble

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In a couple of months’ time, owner managers who have failed to prepare for the end of coronavirus business support measures could find themselves in a tight spot. It is essential to be able to identify key signs of business stress; allowing them to take control and improve their financial standing in order to rebuild a stronger business.

For example, if owner managers seem to be spending more time worrying about the business than they do running it, have noticed a dramatic drop in revenues or have paid dividends without sufficient reserves to cover them, action might be needed before it’s too late. Other signs of trouble could include a lack of communication with creditors or an inability to pay debts on time.

Scenario planning is just one way owner managers can get back on the road to recovery, planning for a variety of ‘what if’ scenarios. Three-way cashflow forecasting involves combining profit and loss accounts, balance sheets and cashflows. This tool helps to facilitate informed decision-making about the business’ future by improving the visibility of costs across the company. It can also help to persuade creditors to be more flexible with their payment terms by providing them with clear expectations on payment deadlines.

Key focus areas

Before Government-backed support schemes such as loans, grants and furlough end it is important business owners consider their long-term viability and future sustainable operation. This flags up four key areas to consider: communication, innovation, protection and cashflow.

For example, questions surrounding cashflow might include identifying and flagging outstanding debt payments and calculating cash reserves for outstanding bills. Innovation should include consideration of a business’ ability to adapt to the new normal of its marketplace and making sure to identify and take advantage of areas of high demand. Questions regarding communication can include asking how frequently owner managers correspond with key suppliers and customers, it might also include relevant communication to lenders regarding cashflow difficulties. Finally, protection questions may include how appropriate a company’s insurance cover is and if owner managers understand the best options to consider if the organisation is experiencing cashflow difficulties.

Post Budget advice

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Following the Budget announcement on 3 March 2021, the Government’s new Restart Grant, due to be introduced from April, could provide around 700,000 UK business owners with an injection of cash during what is hoped to be the final stage of lockdown restrictions. Replacing the monthly Local Restrictions Support Grant, due to close at the end of March, the grant is aimed at supporting businesses that have had to close as a result of lockdown restrictions during the pandemic through to June 21 – the current date in place for lockdown restrictions lifting in England. Under the scheme, non-essential retail businesses can claim up to £6,000 per premises to help them reopen, while those in hospitality, accommodation, leisure, personal care and gyms can receive up to £18,000, depending on rateable values.

To be eligible to claim under the scheme, businesses must be based in England, occupying property on which they pay business rates and must have been required to close because of the national lockdown from 5 January 2021 onwards, or between 5 November and 2 December 2020. The business must also have been unable to provide its usual in-person customer service from its premises. Owner managers can apply for the grant by visiting their local council’s website.

It is vital that owner managers have the key data for the most accurate view of their business’ cashflow. By having access to accurate profit and loss balance sheets and other core management data they will be better positioned to make important decisions regarding their business’ future. They should also consider seeking the support of experienced insolvency practitioners, who can help owner managers in assessing the business’ viability and discuss options for getting back on the road to recovery. Although the COVID-19 vaccination program is well underway, it’s important owner managers ensure they’re cash-ready for the end of Government support measures. By carefully evaluating their financial position and viability, scenario planning and investigating their eligibility for the Restart Grant, owner managers can take back control and prepare for a successful restart.

For further information, including how to assess whether your business will still be viable post-pandemic, please download our recent whitepaper: Managing the Road to Recovery or watch our recent webinar recording on this topic here.

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