Many businesses are feeling the effects of the COVID-19 crisis. It has resulted in reduced demand for products and services, cashflow difficulties, staff lay-offs and even the temporary closure of some businesses.
While customer demand may bounce back quickly once the social restrictions are lifted, many businesses may still struggle to survive. Even on the most optimistic estimate, business owners need to be prepared for a minimum of 3 months of trading difficulties.
Our team at McAvoy & Associates are experienced in helping businesses overcome financial and trading difficulties. Here are some our key steps for every business owner needs to consider when cashflow comes under threat:
Take Action on Cashflow
- Prepare a cashflow forecast for your business for the next 3-6 months. Determine what outflows are critical and what can be delayed or phased over a longer period.
- Discuss debt repayments with your bank or finance provider as a matter of urgency. All the banks have announced that they will offer repayment flexibility to their customers and they may be able to provide payment holidays or emergency working capital facilities.
- Review your customers to identify those directly affected by the crisis. It’s better to be pro-active by trying to offer incentives to expedite the collection of debts rather than delay contact and run the risk of incurring bad debts.
- Review your stock levels. You may need to reduce the levels held for certain stock items as demand temporarily falls. Excess stock ties up cashflow and may bring unwanted storage costs.
- Discuss your situation with your suppliers as it may be possible to extend credit terms or return goods no longer required. Review the existing supplier contracts for force majeure clauses.
- Review your payroll costs. The government introduced a financial support scheme for employers in the form of a Temporary Wage Subsidy Scheme. The scheme will refund employers affected by the pandemic up to a maximum of €410 for each qualifying employee retained on the payroll of the company.
- Discuss your rental obligations with your landlord. The landlord may be willing to offer a rent free period or temporary rent reduction instead of running the risk of losing a tenant.
- Defer your rates payments with your local council. The local councils have agreed to defer rates payments for three months for businesses most impacted by Covid-19. Businesses that are impacted need to contact their local council as decisions for the rates deferral are being made on a case by case basis.
- Delay discretionary spending on items that are not required during these difficult, and hopefully, few months.
- Review your upcoming tax return obligations. Revenue are encouraging all taxpayers to continue to file their tax returns on time even if it’s not possible to pay the liability. Revenue have also stated that they will be suspending any surcharges and interest penalties for late payments of current tax returns.
- Consider delaying any capital expenditure plans that have a long pay-back period.
- If your business has to close temporarily, review any potential savings that may arise and ensure that all necessary steps are taken to avail of these. For example, you could make savings by cancelling unnecessary utilities.
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