Here is a checklist of practical steps you can take to protect your cashflow and the main government measures put in place to support firms through the current COVID-19 shutdown.
- Micromanage by drilling down into your cashflow to a daily level. Make sure you know what your expected income and cash burn for each day is. This will prevent any unexpected liabilities from cropping up further down the line.
- Ensure fee earners are fully up to date with their billings.
- WIP – review your Work in Progress and see what can be billed now and in the short-term. What is required to complete any on-going projects/orders? Is there any reason why you cannot fulfil them? Communicate with your clients.
- Direct work to areas where you are satisfied the time spent will generate a recovery from fees within the next three months.
- Identify what debts can be recovered during this time and consider offering a discount for early settlement.
- Identify what payment holidays or spreading options are available and take advantage of these. Remember to cancel your direct debits or standing orders where appropriate
- PII Financing - firms who have financing arrangements in place with Close Brothers for professional indemnity insurance and/or practising certificates can get in touch with Close Brother's customer service team to discuss options for waiving fees, temporary reduction in repayments or a repayment holiday.
- Speak to your bank/lenders/hire purchase creditors and see if they are willing give you a payment holiday or repayment reduction for the next few months.
- Liaise with your landlord and see if you can have a payment holiday or split the next quarter up over a longer period (i.e monthly payments rather than all at once). If you have arrears, then incorporate these into your cashflow and offer to pay something if you can. If you are unsure about breaching the terms of your lease then always seek independent legal advice.
- Review partners drawings policy and consider restricting these at this time.
- Consider cutting other non-essential items of expenditure, including reviewing how any firm credit cards are being used. Sort your liabilities/recurring expenses by amount, frequency and whether they are critical. Where possible stop any expenditure that is not vital.
- Communication is key – the sooner you engage, the sooner a solution can be found.
Our accountancy partner AAB have done more work in this area and have outlined the key areas businesses should focus on.
As well as looking at cashflow, firms should consider the range of government support available.
- The temporary Coronavirus Business Interruption Loan Scheme (CBILS) from the British Business Bank is supporting SMEs with access to loans, overdrafts, invoice finance and asset finance of up to £5 million. Our accountancy partners, Anderson Anderson Brown LLP (AAB), have produced this useful guidance.
- One-off grants of £10,000, administered via local authorities, are available to small businesses who are eligible for the Small Business Bonus Scheme or Rural Relief.
- Coronavirus Job Retention Scheme allows businesses to furlough employees and apply for a grant that covers 80% of their usual monthly wage costs, up to £2,500 a month.
- Self-Employed Income Support Scheme will provide eligible self-employed individuals (including members of partnerships) to receive a cash grant worth 80% of their average monthly trading profit over the last three years. Along with other UK law societies, we have made representation to the Chancellor to make changes to the threshold.
- VAT deferral - all UK VAT-registered businesses are eligible for or payments due between 20 March and 30 June 2020.
- HMRC’s Time to Pay service may allow businesses flexibility in meeting other tax liabilities.
- 1.6% rates relief for all non-domestic properties in Scotland, effectively freezing the poundage rate.
If you are unsure about what Government support packages are available to your business, our accountancy partners have created a simple toolkit to navigate the options based on your particular circumstances. Find our more on the AAB COVID-19 Information hub