Once you have completed those 5 steps outlined in our previous article, it’s important to start contacting everyone you make payments to. We would advise you do this quickly as most businesses will likely start becoming overwhelmed with too little resource, and to do it with agreement as opposed to risking poor credit marks, which ultimately affects your businesses ability to raise finance in the future.
In an ideal world you'd have a set of financial projections to send to all these suppliers/financiers, but for most businesses, that will take some time to prepare, so concentrate first on making contact and you can provide any necessary information they request later.
At this stage you need to maximise your cash reserves and stop all outgoings, but with agreement. Your focus should be on being able to pay your staff. Obviously, some of these conversations may go better than others, but have them all now and then see what other funding you need after you've assessed this situation, so you will be in a more informed position when the govt loans/grants go live.
We have spoken to our finance partners - Capitalise who have informed us that they will be set up to offer Coronavirus Business Interruption Loan Scheme (CBILS) from Monday. If you are interested in raising finance through this scheme or any others, please fill in this form so that we can apply for this for you via the Capitalise platform, which would include an approach to your existing bank too. This may mean that you don't have to apply individually to your own banks (when the banking contact centers can't cope with the volume). In light of these unprecedented times, we will be waiving our usual Raising Finance service fee of £500.00 in order help our existing clients through this process.
Again, thanks to Kirsty McGregor – Founder of the Corporate Finance Network, the following ‘to-do’ list will help you through this, and the brilliant blog articles she has been posting with guidance.
- Assume with HMRC you'll have a little leeway. So don't contact them until closer to your due date for PAYE/NIC, VAT, Corporation Tax etc. If that is very soon, ask your accountant to do that for you now to agree a deferral of any due payments. Alternatively, call the HMRC’s dedicated helpline on 0800 0159 559.
- Landlord - if you are renting premises (and still need to), contact them immediately and ask for some extra time.
- Rates/council tax - contact your local authority and explain you are holding back payment until it's all agreed. It is highly unlikely your Local Authority will take court action for non-payment at the moment, so inform them & then cancel your direct debit with them
- Utilities, phone, broadband, insurance - open up communication about alternative payment terms, before you cancel any direct debits (or they bounce if you are overdrawn). You do not want them to cut you off/cancel your policy but you need to see if they are open to alternatives.
- Banks - speak to your clearing bank and see if you can arrange/extend your agreed overdraft; mortgages/loans - ask for a 3m or 6m payment holiday; credit cards - ask for a payment holiday and lower interest
- Finance companies & leasing - as above
- Trade suppliers - start with the largest companies first and ask about extending payment terms. Don't do your normal 'payment run'. Take more time each week assessing who are going to pay and how much. More details on the next blog about planning future cashflows.
- Consider applying for a fuel card or a credit card to give you 40+ days of cashflow leeway for daily expenditure - although to avoid interest you must pay in full on or before the due date. You need to be very careful in a downturn, especially if you are company director, that you don't trade insolvently and you don't knowingly take on extra credit if you know you will not be able to repay it
- Stop any other unnecessary expenditure - stationery, repair bills, restocking, apps/software renewals, licenses - whatever you'd normally pay for on a regular basis, review and see whether you will still need those outgoings.
Once you have got organised and made contact with your suppliers and lenders to adjust all of your ‘normal’ payments, it is important to look forward and assess your additional working capital needs based on your revised cashflow projections. There is an expectation that there is still going to be a requirement to show affordability - so cashflows will be essential. Our job as accountants and advisors is to help you do just that, and we can likely do this quicker than you can. We have the software and experience to create reliable cashflow forecasts which you can use quickly, so that you can focus on things such as customer service, marketing and staff management.
If you have any questions, please email us on info@raffingers.co.uk
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