The impact of the Covid 19 crisis will be severe and business owners need to make immediate decisions to maximise the chance of their business recovering. The following is a brief summary of actions business owners should take along with references to useful information sources.
- Establish your current financial position
List out your assets and what you owe to creditors to establish your financial position.
- Prepare & maintain a cashflow projection
You should prepare a cashflow projection setting out,
on a week by week basis, what incomings and outgoings you have and the impact
on your bank balance. The cashflow will allow you to determine;
- Where and when a cash crisis could arise
- Which receipts need to be collected or highlight which receipts may be in doubt so you can try to reach agreements with customers
- Which payments you need to defer and which suppliers you need to work with
- Whether you have sufficient cashflow to retain employees using the Employer Covid 19 Scheme
It should also assist in setting out what your cash burn is on a weekly
basis and you can take steps to minimise this.
- Consider alternative means of doing business
For example, many restaurant owners have begun to offer takeaway services to customers. Maybe online sales or delivery only options could work for your business. If you are going down this route, consider how you simplify your business offering so there is a worthwhile margin at a reduced business level. In our case, scheduling conference call or video call meetings means we can continue to work with clients.
It is in every business’s interest that their
suppliers and customers survive. Explaining what you can and can’t pay in a
timely manner will help in maintaining customer and supplier relationships. Cut
deals with customers to fit with their financial position.
- Consider Settlement Agreements
Consider if certain assets can be used to defray
liabilities. For example, if you are holding €60,000 in stock purchased on a
retention of title basis from suppliers, you are better off agreeing a deferral
of payment pending sale or a return of goods than using up cash reserves paying
that supplier. If you have sold goods on a retention of title basis, consider
whether you should collect goods from customers.
If you have assets on lease which wont be used,
contact the leasing company to agree a moratorium on payments pending
resolution of the crisis.
If vehicles are going to be off the road, advise your
insurers and seek a reduction in premiums whilst they are parked up.
- Perishable or Seasonal Stock
You should review stock on hand and try to convert perishable or seasonal stock into cash.
Standing orders such as pension contributions should
be reviewed and postponed if necessary.
- Try to maintain a reserve
Rather than using up all funds you have, try to move
some funds into a reserve deposit account so that it isn’t depleted by standing
orders/debits and can be used to get back up and running.
Information
for employers and employees can be accessed at the Department
of Employment Affairs and Social Protection. The Department has a range of
measures to provide income support to people affected by Covid 19.
Revenue’s published advice can be accessed on
www.gov.ie. https://www.gov.ie/en/service/be74d3-covid-19-pandemic-unemployment-payment/
https://www.gov.ie/en/news/965011-covid-19-introduction-of-simplified-unemployment-payments-for-employ/
It is essential to file returns on time for compliance
purposes.
The timing of payments to Revenue should be deferred
to fit with the cashflow of the business.
Owners need to consider their long term objectives in
determining how to act.
For example, we have been working with a supplier to the
restaurant trade who intended to retire and cease operations in 2021. In his
case, it may, unfortunately, make more sense to cease operating fully now.
Acting decisively now will give your business the best
chance of surviving the crisis.
We are willing to assist business owners on assessing
their options now and as the crisis progresses.
We can advise on internal restructurings, on informal
restructuring with creditors and other options including examinerships and
liquidations.
If I can be of assistance please contact me directly.
Paul Cantwell
paul@cantwellcf.ie
090 64 39905
