By Jonathan Amponsah CTA FCCA, The Tax Guys
Despite lockdown being gradually lifted, and more businesses beginning to reopen, there are still many that will remain closed or operate at a reduced capacity for a while. A large number of employees will be furloughed until the autumn and a return to ‘business as usual’ seems a long way down the track. Unless you are one of the lucky ones doing really well during lockdown, you may be wondering if your busines can survive.
Let’s look at some actions you can take to help you get through this evolving covid-19 lockdown and how you can leverage your business. Links to free template and other resources are included to assist you.
I suggest you begin by creating a financial action planner on a spreadsheet (download a free template here).
Applying for government help
Ask your accountant about the help available and check to see where you qualify.
For example, if you’re sole trader/freelancer there is a grant available. It’s important to understand your own financials and the scheme rules before applying. If you’re eligible, you’ll have received a letter from the government. This scheme opened on 13 May 2020 and you need to register for an online account and prepare to file the claim. It’s worth getting help from your accountant so your paperwork is right – not just on the claim, but on your tax returns also.
If you run a limited company (including one-man band companies) there is help available. This keeps changing, so watch out for the dates and deadlines. Speaking to your accountant can help ensure you include everything necessary for your business in your plan.
Cutting cost without suffocating your business
Even where you have no income for, say three months, unless you plan to close your business, there are some expenses you may want to leave alone or even increase when your competitors are cutting back (for example, smart marketing).
If cost-cutting is necessary, create a spreadsheet with all your expenses and then look at each in turn and see where you can cut back. A few small cuts can make a big overall difference and will often be less damaging to the business than one or two large cuts. Ensure you understand your cashflow and what ‘target’ you need to reach to survive.
You can read more about cost cutting here; https://www.thetaxguys.co.uk/2020/04/24/how-to-cut-costs-without-crippling-your-business/
Once you’ve reduced your costs and you know where your income will come from in the next 6-12 weeks (including income from the government), you’ll have a 12-week cashflow forecast. This document is the basis of your business moving ahead. Stick to it. If you’ve decided to cut some costs – cut them. If you’re going to ramp up the marketing or add a new service – do so.
You can download an integrated cash flow forecast tool here (time saving tool to project income-expense and cashflow.
Saving tax during the lockdown and beyond
Did you know there are many areas to save tax during a pandemic? They include:
Negligible Value Claim (Get a tax refund if an asset you purchased has gone down in value), Normal Loss Relief (Generate a tax refund from last year), VAT bad debt relief (Reclaim any VAT you’ve paid on bad debt), Early tax filing (File your returns early to secure eligible tax refunds), Realising capital losses (If an asset you hold has gone down in value, consider selling it), to list just five. Talk to your accountant to find out more about these and other potential tax saving opportunities.
Creating more customers by looking at current demand
How can your business solve some of the current pressing problems posed by the pandemic? If you’re a services business, can you productise parts of what you do and sell these at reduced prices for now? For example, can you run your craft workshops online via Zoom etc.? Mail out the craft items and then everyone logs on to make them together.
Generating additional revenue by anticipating problems/trends
The way we do business has changed and some changes are likely to stay, at least for the short-medium term. What opportunities are there for you? If you’re an accountant, how can you support businesses in the coming months when they have to pay back their deferred taxes? If you’re a marketer, how are you preparing your clients with the right messaging to market their business successfully?
Download a white paper here, with examples of 16 UK companies grabbing new business opportunities.
Please take care of your own physical wellbeing and mental health. I hope the information and resources provide here will help get you through these stressful times and that you and your business will thrive.
ABOUT THE AUTHOR
Jonathan Amponsah CTA FCCA is an award-winning chartered accountant and tax adviser who helps improve businesses. He is the CEO of The Tax Guys.