Steps to help business cash flow during a pandemic

As the global response to coronavirus COVID-19 evolves, organisations are experiencing significant operational, financial, and liquidity challenges. After ensuring the safety of their employees, most businesses' main concern is how they can manage their cash pressures to ride out the crisis.

Here we detail six practical steps that all businesses can take to help with cash flow.

Take Immediate Steps to Manage your Cash Flow

It is important for business owners to fully understand what their short term cash flow looks like. Make note of all payments down to the day to get a complete picture. Defer any non-essential spending and follow up on all debtors as a matter of priority. Make sure your invoice is on top of their list.

Many businesses work with a few suppliers. Reach out to your suppliers and see if you can extend your usual payment terms, or if your supplier can offer a temporary payment grace period. Also, if you lease your business premises, you may want to reach out to your landlord to see if they are able to offer you some sort of payment grace period or a reduction on rent.

Don't forget about your customers. Now is a time to look after them. If you have had to temporarily shut down, use your company's social media channels to engage with your customers and to promote new service offerings - for example, gift cards with no expiration date. This can help solve your immediate cash flow needs and make these current customers ones for life.

If your business's revenue has been significantly diminished, you may need to consider cutting some of your workforce or at least reducing the payroll. Before doing so, know that the Irish government is running an Employment Wage Subsidy Scheme until April 2021. Details can be found here. If this scheme is still not sufficient, other potential solutions include a reduced working week or salary cuts. However, if you are forced to lay off employees, be transparent and fair. Ensure that your employees are aware of the various Department of Social Welfare supports available.

Talk to your bank

All retail banks have announced that they will offer flexibility to their customers through payment breaks. A payment break gives you a break from repaying your mortgage, personal loan, or business loan. Be aware that although there are no upfront costs associated with a payment break, you will be charged interest on any repayments that are not made as part of the payment break. The closing date for the first applications to be received and approved is the 30th of September 2020.

In addition, the banks have adopted a customer-focused approach with a wide variety of tailored supports including extensions of credit lines, risk guarantees, and trade finance.

Below are links to the major bank's COVID-19 support pages.

AIB, Bank of Ireland, Permanent TSB, Ulster Bank, KBC.

Use Available Government Supports

A large number of supports are available for business owners to help you and your employees during the COVID-19 pandemic. The details of which will be discussed at length in another blog. However, some of the key supports include a Restart Grant available for your business, an Employment Wage Support Scheme, a reduction of the standard rate of VAT from 23% to 21% and supports for small companies through Microfinance Ireland and the Local Enterprises Offices.

Check Your Insurance Cover

Now would be a good time to examine the wording of all insurance policies to determine the level of cover they provide.

See whether the insurance policy includes 'business interruption' and that the wording of the policy covers the current situation. In general, business interruption policies cover losses incurred by a business where a building has been physically damaged - for example, flooding or due to fire. However, some insurance policies cover business interruption losses caused by a "notifiable disease" and on 20 February 2020, COVID-19 was declared a notifiable disease by law in Ireland. The use of this wording may be a requirement to claim under these policies.

Some business interruption policies also provide cover for losses resulting from closure as a result of a direction by a government or state body. Nevertheless, it is advisable to contact your solicitor before pursuing any insurance claim.

For more information on insurance issues to consider click here.

Engage with Revenue

On 2 May 2020, the Irish Government announced a number of measures to support businesses that were negatively impacted by COVID-19. One of these measures was the “warehousing” of tax liabilities for a period of twelve months after recommencement of trading during which time there will be no debt enforcement action taken by Revenue and no interest charge accruing in respect of the warehoused debt. The tax heads covered in this measure are VAT and Employer PAYE. A complete description can be found here.

Revenue has requested the continuation of filing tax returns on time, even when a full or partial payment is not immediately possible.

If you are having any concerns about your ability to pay your tax liabilities, contact Revenue through their MyEnquires service from your Revenue MyAccount.

Get Advice

Use the advisory support available from your Local Enterprise Office. Also, ask for advice from your accountant. For accounting services, StartSmart would recommend Thomas Clarke Accountancy & Co Ltd. They have been providing personal, professional, and reliable accounting services at affordable rates for over 30 years. If you wish to get in touch contact them by phone at 045434643 or by email at gerardclarke.tca@gmail.com.

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