Coronavirus: Reacting to Business Change - Covid-19 and financial risk

Most businesses have never seen or had to experience and manage such severe and dynamic unexpected change as we are all facing. Many smaller businesses have less management resource or experience to cope with change and businesses also affected by key management and staff entering isolation. We wanted to offer what we hope are some sage words from those of us that have assisted many businesses in distress over many years.

Nobody has faced this sort of threat but there are clear similarities to other causes of business distress.

We all have complex social, business, financial and personal decisions to make but first or all:

  • Be safe everyone and try to keep your business safe
  • Don’t panic.

We are here to help you. So - if you wish to have a no commitment 20 minute call – ring us or email us on our contact details below. We too as a business are managing change and working remotely but our phones are diverted and we are continuing to adopt our stance of “business as usual” either from the office or at home.

Some of your questions may be specific to you but others may be more generic and below we offer some immediate comments on some key considerations.

Understand your business and its key needs and key staff and relationships

This can sometimes be taken for granted or lie in the hands of a few. You should quickly understand this, who the key people holding key relationships are and engage with these areas and people. Protect them and nurture them: they are the foundation on which your business lies and their physical and mental health and wellbeing are also a very important aspect of your business.


Now is not the time to hunker down and hide – action is needed with good communication on key issues – on what you can and cannot do or what you will or will not do -  saves time and resource and builds and retains confidence. If you need help and advice seek it – don’t seek the answers you want to hear but rely on trusted advisors and people they trust to give specialist advice as their own reputations lie in the trust they nurture.

Communication with the key stake holders is the most important – delivering bad news with confidence and a solution (or a timeline to provide a solution) secures confidence and is very likely to secure the three most vital things a business needs.

The three most vital and limited resources the business need

  • Cash is king – collecting it and using it to buy the vital resources needed.
  • Time – will always be limited – so use it wisely.
  • Protection – if there is shortage of cash and time, protection that enables you to preserve, protect, reshape and rebuild may be key. Speak to customers and suppliers (with whom you ultimately operate symbiotically) and seek to agree how you use the cash and time you have. Speak to less vital creditors too as they may react badly to silence.

Also, never lie – be honest and as clear as you can be and if you do not know, tell people that you don’t know but also tell them when you expect to know and provide a timeline for telling them. Be organised.

Look to the support that you know and trust:

Supply Chains

If any party to a vital supply chain fails the whole chain may break, so support the vital elements of your supply chain – enable them to pay their suppliers and secure your supplies with agreed credit and payments and manageable orders and deliveries. Careful stock management is also key as this reflects on your ability to deliver overstocking may tie up cash or available credit.

Financial Stakeholders

There is a mutual reliance of funder and borrower but there should be a clear allocation of risk and reward. Their business is to provide finance, not to wholly fund your business.

No loan is a good loan until repaid so funders will also wish to manage their exposure to risk. Good and careful accounting information is key: a well managed and recorded cash flow and regular management accounts including Profit & Loss and balance sheet should be prepared for the business, and available for review by funders. Banks lend against the security in assets – not profit. A business is more likely to secure lending and support despite a temporary loss in profit where it has real value in its book debts, work in progress, assets and maintains good cash management. Records are critical.

Look to other sources of finance that may not be used – eg stock and invoice finance, chattel finance and secured loans; these can really help cashflow – particularly where payments terms are being extended.


Good management of staff is key, tangible assets are a great tool but businesses are still (in the main) built on contacts, supply lines, trust and confidence. The government is keen to support but, in real terms, there may be a delay in cash reaching individuals. Offering discretionary support to staff may mean staff remain engaged and invested in the business, looking to promote profit lines, and provide some comfort in their own immediate financial future. Good communication and looking to manage the employee roles to required work and expected work are important.

When faced with a temporary issue, redundancies are expensive and accelerate cost. As the economy and market place recovers, this may also lead to later recruitment costs. There are a range of options such as: change of hours, redeployment, shift sharing, lay off – (not dismissal), use of holidays etc. Balance, in the light of careful advice, is key. Seek employment advice, particularly given the position will continue to evolve.

Prepayments, vouchers and loyalty discounts

Any voucher or prepayment scheme will assist with cash flow by securing earlier payment but, it will inevitably crystallise into a liability to provide the goods or services being pre-paid for. Care is required if the ability to provide services of goods is in doubt. Any use of customer deposit accounts to manage that risk is not easy to manage well but can potentially alleviate some of these risks. Insurance and bonding may be available but more difficult to obtain when in financial distress.

The use of loyalty schemes and databases to promote services can aid this sort of engagement and promote sales even if made at a lower level and contribute to costs. Care is needed not to create future problems if the business is unable or unwilling to honour such vouchers later.

Prepayments for discounts can secure faster cash flow but impact on profit.

Temporary closure - mothballing

Many businesses may contemplate closing the doors to customers during the coronavirus outbreak and that could become compulsory. Management will need consider the impact of contracts for supply of goods and manage payments of essential costs only having regard to the interests of creditors as a whole.

Costs required to protect and preserve asset values, realisation of perishable goods, compliance with insurance, regulatory obligations etc may all be necessary but where the business is not bound into a contract or if it is not necessary a review and possible negotiation is prudent, and beneficial to all parties.


Business interruption insurance rarely includes pandemic insurance but other insurances should be considered. Careful consideration of insurance policies that may respond to other risks should be notified.

Also, if you are altering the way in which goods or services are provided – eg by moving online, you should consider the limits of your insurance, and any that you remain covered for new service delivery.


Terminating contracts can be very expensive – non payment and defaults can also permit termination and be expensive. Consider terms and understand your options. Consider if you can agree suspension or variation of contracts (to mitigate risk, costs to both parties and pressure on cash) and the consequences of acting unilaterally. Termination may not be the best answer.


Landlords play an important role in many businesses and key element of cost. Landlords do not like empty premises. Consider options such as monthly rent, part payments, turnover rents, partial occupation, change of use – these all need advice and should be documented. Pubs that consider adopting take away trade under relaxed licensing should also seek any necessary change of use from landlords. Staying open clauses should also be carefully considered.

The courts, proceedings and enforcement

To date they are running as normal and plan to adopt to enable the proper administration of justice with remote telephone and video hearings. They will adapt to illness and self isolation issues but good communication is also needed.  Time for issue of proceedings and compliance with orders etc does not stop. Contractual processes eg arbitration adjudication, mediation, notices and time limits remain unaltered unless agreed, so care and planning is needed.

Published Measures: Government Support

Some of these re-vamp existing arrangements and some still lack detail – the government and other parties are all adapting too.

Business loans

Small and medium sized businesses (turnover under £12.9 million and 250 employees or less) can apply for loans – generally from existing lenders- under the coronavirus business interruption loan scheme (CBILS). This extends the Enterprise Finance Guarantee (EFG) scheme and, like EFG, is delivered through the British Business Bank with existing lender partners: see link or speak to your normal banker.  Note: Not all sectors are equally eligible but the message we here is that good business is continuing to secure support of the banks. Loans may be available subject to business case and circumstances of up to £5m.

HMRC - Time to pay (TTP) arrangements

HMRC TTP will be revitalised and businesses and the self-employed who are struggling financially and have tax liabilities to meet can call the HMRC dedicated helpline to discuss a TTP arrangement on 08000 159 559 (Open Monday-Friday from 8am to 8pm and Saturday from 8am to 4pm, excluding bank holidays). You will need a good explanation and proposal to put to them but engaging with HMRC may avoid penalties. Accountants and Insolvency Practitioners can often assist in putting together a viable – reviewed – proposal which adds credibility

Business rates – reliefs

There will be a one-year business rates holiday for the retail, hospitality and leisure sector. Clarity around the scope of the relief and sectors may need care in some cases or directed around SIC codes or permitted use. This is automatically in place and being administered by the local authority who you pay rates to. If in doubt contact them.

Small Business Rates Relief or Rural Rates Relief are to be added to with grants of £10,000, administered by the local authority to whom businesses apply for the relief, without the need to make an application for the grant.

Further grants for retail, hospitality leisure businesses operating from premises with a rateable value for tax purposes of between £15,000 and £51,000 were also announced alongside some relaxation of licensing. Detail is awaited but communication with the local authority alongside discussions on payment would be wise. The grant indicated was up to £25,000

Employees Statutory sick pay (SSP)

SSP will be available from day one of someone being off sick or self isolating as a result of coronavirus under guidance for a period of two weeks without the need for GP sick note. However, record keeping remains important, especially once home working is adopted (to be clear what periods SSP claims are for so these can be administered for repayment by the government.)

This will be recovered through PAYE and National Insurance monthly returns.

Employment allowance (EA)

EA is available for employers with a total qualifying employer’s (secondary) Class 1 National Insurance Contributions (NICs) of over £3,000 and less than £100,000 per year. It will increase from £3,000 to  £4,000 for 2020/21. For smaller businesses there may be rebates to claim. Eligibility may need to be checked.


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