Since the unexpected arrival of COVID-19, business owners have been doing their best to weather the storm and navigate through this unprecedented situation. SMEs have been hit particularly hard by COVID-19, with 80% reporting declining revenue, compared to the 80% of SMEs who said their revenue was stable or growing prior to the onset of the pandemic. 
Now, over six months after the UK first went into lockdown, it’s time to reflect back on everything we think you need to know, and consider what the best next steps are to ensure your business is on the right path. Our MD, Miguel Calabrese, gave his top 10 pieces of advice for small and medium sized businesses owners.
Q1. What opportunities are out there to take advantage of right now?
A1. If business owners haven’t looked into it already, and their businesses are struggling, I strongly recommend that they look into the government backed loans and any available grant schemes they are eligible for.
Originally the government’s ‘Bounce Back Loan Scheme’ was set to be repaid within 6 years, with the first year interest-free and then 2.5% interest annually thereafter. This has recently been changed to the more favourable ‘Pay as You Grow’ scheme with a 10 year repayment deadline, which effectively almost cuts the repayments in half and can also be used to expand your business if you’re in the position to do so.
Businesses can also choose to make interest only repayments, or even choose to apply to suspend their repayments altogether for up to 6 months. The application deadline for the loan has been extended until Monday 30th November, so I urge business owners who have been negatively impacted by the Coronavirus to apply while they have the option. 
Grants are the best kept secret, however they are highly competitive and are unfortunately running out almost as quickly as they’re advertised. If people want to apply they have to join waiting lists to be considered now and the grants are allocated on a first-come, first-served basis.
If this is something people are interested in looking into they would need to check their Local Enterprise Partnerships. For Kent and the Southeast this would be southeastbusiness.org.uk. From there small business owners can sign up and express their interest in the grants, and stay up to date with any new offerings.
My other suggestion is grantsonline.org.uk, which advertises industry specific grants and isn’t just limited to the Southeast and Kent.
The other opportunities are automatic, such as VAT bill and Self-Assessment liabilities deferrals. So they are benefits, but you don’t have to do anything to have access to them.
Q2. Are there any current pitfalls that business owners should be aware of in order to avoid getting caught out?
A2. Following from my previous point, if self-employed business owners can pay their tax and self-assessment liabilities I would urge them to do so. There is interest charged on deferred tax, so there is no real benefit in deferring your payments if you don’t have to.
I can’t stress enough how important it is for self-employed business owners to keep robust records. With so many grants and loans given out, they need to keep on top of their profits and make sure they can justify the need for any schemes they have applied for.
Investigations will start taking place next year, and if they do end up earning more than expected they will need to show why and prove that the loan/grant was warranted. As long as they can show why it was necessary at the time of application then there should be no further issues.
The most important advice I can give to Limited Companies who are utilising the different support available, is to be careful about what they are using the money for. It should only be used for genuine business expenses, otherwise they are at risk for being flagged up as taking illegal dividends.
They shouldn’t spend the money on buying a new hot tub if their business is at risk for insolvency, because they will need to pay it back in some form! By all means, if they are making enough profit and can justify their expenses then they are welcome to do whatever they like with the money.
If they are unsure, then they should speak to their accountant and take a look at their management accounts before making a decision on taking their dividends.
Q3. For those who have managed to survive the past 6 months but are now concerned about next year’s targets – what should they be doing to ensure their pipeline is as healthy as possible?
A3. For those who have been able to continue on with their business as usual, or have even been busier than they would have expected, they should keep going as they have been. It is easy to get distracted by a spike in activity, but I would expect this to level out at some point and caution them to ride out the situation without making big business decisions at this point.
The businesses who have either hibernated, or have been struggling, should look ahead in short increments. Take three month chunks and plan according to a 13 week forecast. Business owners need to remember to put themselves first and make difficult decisions sooner rather than later. They can’t run their business on promises, so they should take stock of their outgoings and grade them all accordingly.
From there they can decide what should be cut, trimmed back or extended. It’s really all about being sensible – under no circumstances should any business cancel their insurance to save cash!
Q4. For those who have done well, or had unexpected growth, how can they capitalise on their successes?
A4. First of all, store the cash! Is the business upturn just because of COVID-19? If so, then they can absolutely reward themselves, but by and large it’s wise to store the growth.
If the unexpected business growth looks like it will be a long term change then they should look at tax planning, budgeting and their cash flow forecasts. But this should be in line with what they are already doing in their normal business planning.
They should also pay their loans and any deferrals they set up. At some point they will be hit with payments, so it’s better to take care of that before it becomes an issue.
If in doubt, get in touch with their accountant who will be able to offer further advice.
Q5. If they have been successful will they be subject to tax investigation? What should they be aware of or how should they prepare for it?
A5. Successful businesses will probably be ok, and shouldn’t be overly concerned about tax investigations as long as their business growth is proportional.
Tax investigations are unavoidable and will happen for various reasons, but unless HMRC are tipped off specifically about a business, then there is no reason to expect that a business is more likely to be investigated due to its growth.
As always, if business owners maintain their financial records and the details of the business decisions they have made then they do not need to worry if they are investigated.
Q6. Is there anything people should be aware of with regards to furlough investigations? Should they be preparing any paperwork in order to protect their businesses?
A6. The furlough scheme has been abused, and it will be subject to investigation.
Business owners need to make sure they have kept all their calculations, and the paperwork for every furlough claim. If they have made genuine mistakes, but the mistakes are consistent across the board there is every reason to believe HMRC will be lenient. They will be looking for people/companies who have knowingly abused the system.
The letters they are sending out have been very generic, so if a business owner has received one, they should just respond straight away and offer up all the paperwork they have.
Q7. With the furlough scheme ending are there business implications for making staff redundant? At what point should they make decisions regarding redundancies?
A7. Redundancies should be made sooner rather than later.
From a commercial and business point of view it will cost more to make employees redundant after the end of October when the furlough scheme ends, as it can be used to cover notice pay, but not the redundancy element.
There is a Job Retention Bonus, of £1000 per furloughed employee, due to pay out in February – I caution business owners not to get distracted by it if they are just planning to make redundancies after January. It’s a false economy. They will end up paying more in salaries than they would save with the bonus.
I recommend taking the advice of an HR specialist if a business does decide to make redundancies to ensure all the correct steps are taken. Contact us for a referral if you need one.
Q8. Should businesses be looking at making changes to payment terms for their suppliers? For example, holding off payment, changing payment terms and finding new suppliers.
A8. My main advice would be to pay as normally as possible, when possible. Money needs to circulate to keep the economy running, so people need to make sure they aren’t stockpiling funds.
Ultimately if a business is struggling to keep up with the payments to their suppliers, communication is key. Speak with them and make sure the supplier knows what’s going on, and when they are able to make a payment then they should definitely do so.
Always look at new suppliers and cost, but also keep the level of service in mind. If their current supplier base is reliable and of good quality, it may be short sighted to switch to a cheaper and potentially lower quality option.
Q9. Should businesses offer employment opportunities right now? For new positions and utilising the government’s apprentice scheme?
A9. Any employment opportunity should be based on business needs, there is no point in offering an apprenticeship solely to gain from the government incentive.
If there is growth within a business and there is the requirement for new staff then there is no reason to hold back. If anything, now is a great time to find highly talented potential employees that are worth snapping up.
Q10. Do you have any additional tips that business owners should keep in mind?
A10. Business owners need to make sure they keep their cashflow healthy and look at their credit control to make sure they are keeping on top of their payments.
They need to be consistent with this and work systematically over time to ensure they are getting paid and are able to deal with any late or non-payments.
Having a system in place will help with this, and if anyone is struggling then they are more than welcome to get in touch. I’m always happy to help where possible.
The information and data in this article was correct at the time of publishing and every attempt is made to ensure its accuracy. However, it may now be out of date or superseded. Blue Rocket Accounting make no representation or warranty of any kind regarding the content of this article and accept no responsibility or liability for any decisions made by the reader based on the information and/or data shown here.