Insights

Emergency Action Plan for Business Owners

By RJP LLP on 21 April 2020

The next three months will be critical for many business owners and not every business will be able to survive but it is important to do whatever you can to safeguard the business. With customers in isolation or unable to use your products and services and staff furloughed, there is the prospect of little income for the next quarter.

If you are applying for emergency funding, you will need to provide evidence of cash flow forecasts and emergency business contingency planning to secure the finance. Even if you are not, the advice in this article still holds true for all businesses and there is no harm in planning for worse case scenario.

Business Checklist for the Quarter Ahead

Calculate your fixed overheads e.g. rent, insurance, salaries etc.

Work out your breakeven point and the sales you must achieve at a specific margin to break even.

Estimate your profit and loss account on a month by month basis.

Look at your cash position on a weekly basis and plot the payments you need to make along with the anticipated income.

Then re-calculate your cash position using a worse case scenario

If you are looking to use the Coronavirus Business Interruption Loan Scheme (CBILS) approach your bank and discuss the figures above. For some banks this will be sufficient for others they may need further information.

Other Areas to Help Improve Your Position

Involve your employees in discussions about how to reduce costs and maintain revenues, they will have ideas about how you could adapt and potentially innovate into new areas.

Review your list of products and services and eliminate those that are unprofitable or not core products/services. Consider any new ones you can offer, launching online services, take home options or new solutions.

Tighten up your accounts payable. Don’t deal with any customers who always struggle to pay you. Review your debtors list and chase up overdue invoices (if appropriate). Offer existing debtors payment options to ensure you get paid.

Agree extended payment terms with all suppliers in advance to give you greater flexibility.

Invest time in your best customers and put extra effort into ensuring your relationships with them are really solid.

Make use of the VAT deferral scheme offered by HMRC

RJP can help you to create a cash flow forecast and plan for the coming months.