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How Business Owners Can Manage Restart Anxiety

As lockdown restrictions are slowly eased, SME owners should take the opportunity to find ways of future-proofing their businesses' cashflow.

Posted: 12th April 2021 by
Underwood & Cullen
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Finance Monthly hears from Menzies LLP business recovery partners Simon Underwood and John Cullen on how owner-managers can overcome restart anxiety.

During the pandemic, a £407 billion support package has enabled many UK businesses to maintain a healthy cashflow and survive to fight another day. However, with the end of Government support on the horizon, many owner-managers may be experiencing ‘restart anxiety’ and be putting off the important decisions needed to future proof their businesses.

By spotting financial red flags and conducting effective scenario planning, owner-managers can take steps to turn their fortunes around and improve their chances of performing successfully when they reopen. They should also investigate their eligibility for the Government’s new Restart Grant, which could provide them with a much-needed cashflow boost over what may be the final few months of lockdown restrictions.

Owner-managers that fail to prepare for the end of coronavirus business support measures could be facing a cliff-edge scenario in a few months’ time. Being able to spot key signs of business stress is essential, allowing them to take action to improve their financial position and 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 can help owner managers to get back on the road to recovery by planning for a number of ‘what if’ scenarios. Three-way cashflow forecasting involves combining a business’ profit and loss accounts, balance sheets and cashflow. In the current uncertain economic environment, this tool can help to facilitate informed decision-making about the business’ future by improving the visibility of costs across the company. This type of cashflow management can also help to convince creditors to flex their payment terms by providing them with greater confidence about when payments can be expected.

Scenario planning can help owner managers to get back on the road to recovery by planning for a number of ‘what if’ scenarios.

To understand if they will be able to operate sustainably once Government-backed support such as grants, loans and the furlough scheme come to an end, business owners must be able to assess their long-term viability. To do this, they should ask themselves questions across four key areas; cashflow, innovation, communication and protection.

For example, questions around cashflow might include asking whether there is enough cash in the bank to pay any outstanding bills and whether there are any outstanding debts that could be called in. ‘Innovation’ should include a consideration of areas such as whether the business is doing enough to adapt to the new normal for its marketplace and take advantage of areas of demand, such as eCommerce. Key questions around communication might include asking how regularly owner managers are keeping in touch with key customers and suppliers, and whether the business is reaching out to lenders if it’s experiencing cashflow difficulties. Finally, ‘protection’ questions might include whether the company has the right insurance cover, including unrestricted business interruption insurance, and whether the owner manager understands their options if the organisation is in cashflow difficulty.

Announced in the Budget on 3 March 2021 and introduced from April, the Government’s new Restart Grant 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, which closed at the end of March, the grant is aimed at helping businesses that have had to close as a result of lockdown restrictions during the pandemic through to 21 June – the date currently in place for the lifting of lockdown restrictions 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.

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In order to see the true picture of their business’ cashflow, it is vital that owner-managers have the key numbers at their fingertips. By having access to accurate profit and loss balance sheets and other core management data they will be in a better position to make important decisions about their business’ future. Owner-managers should also consider seeking the support of experienced insolvency practitioners, who can help owner managers in assessing the business’ viability and talk through its options for getting back on the road to recovery.

While the rollout of the COVID-19 vaccination programme is creating a light at the end of the tunnel for the UK business landscape, the pandemic is far from over and it’s crucial for owner managers to ensure they’re cash-ready for the end of Government support measures. By carefully assessing 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.

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