The Government’s furlough scheme provided a lifeline for many struggling businesses; however, with the end date in sight, it has been forced to introduce further support to mitigate the number of possible redundancies.
The new Job Support Scheme will see the Government and employers share the cost of topping up working hours, requiring employees to work at least one third of their normal hours and be paid for that time by their employer.
While a lifeline for some, many cash-strapped businesses will be unable to fulfil this in the long run. How can directors take advantage of the additional support out there and protect themselves for the future?
Remember: cash is always king
Businesses should take this opportunity to assess their current position and implement operational changes to preserve cash in the months ahead, including potential restructuring, and supplier and contract negotiations.
Having a clear plan for the coming months could help reduce risk exposure, boost cash flow, and allow companies to take advantage of the new and existing government support that is available.
Poor cash flow and limited cash reserves can be crippling to even the most profitable of businesses, especially in a recession. Therefore, having a good invoicing and collections system is essential to staying on top of any payments coming in.
Keep debtors close
When times are tough, it’s common for businesses start paying creditors more slowly, while asking debtors to pay more quickly. Debtors may also ask to change their payment terms, extending the usual 30-day terms to 40, 50 or even 60 days, however, companies should make sure to check credit reports before agreeing to this.
By only offering extended terms to customers with strong credit ratings and who are paying others on time, companies can protect themselves for the future, whilst offering a helping hand to other businesses in the sector that may be experiencing tough times.
Collaboration is key
Understanding the nature of existing and potential businesses relationships is essential when the economy is struggling.
Businesses should concentrate on generating income from those who currently have greater access to funds and should mirror the payment terms of their clients. Having alternative suppliers on standby, if necessary, can prove invaluable to companies working to tight profit margins, and those spinning many plates.
Look further afield
As well as short-term support, businesses should be taking advantage of more permanent measures, too.
The recently-introduced Corporate Insolvency and Governance Act 2020 includes measures such as a 20 business-day moratorium, allowing temporary suspension of the repayment of debts. The new legislation allows businesses more time to restructure or seek financial support without creditors taking immediate action to recover any debts owed.
Supporting businesses in their most challenging times
For companies that anticipate further challenges, being proactive and seeking access to additional support measures, and advice from a professional is wise. They can help weigh-up which support options best suit a business model and provide a long-term survival plan.
If your business is experiencing financial difficulties, and you’re concerned about the future, then speak to a member of your local corporate, restructuring and insolvency team.
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