- There are a number of critical issues for businesses to consider when under pressure from events such as Coronavirus (COVID-19)
- Avoid hasty decisions – they could prove costly in the long run
- Ask for help. There are numerous sources of support and advice
Ensuring a business is resilient and survives has as much to do with being in a position to recover once the impacts of the virus drop away as it is about managing day-to-day setbacks. Hasty decisions can prove costly in the long run.
We recommend you contact your Chartered Accountant for business advice, but here are some specific issues for businesses to bear in mind.
1. Managing your workforce
Among the hasty decisions to avoid are ones concerning labour costs.
Options include the Government’s wage subsidy scheme and leave and self-isolation support. See the link to our resources section below for more information on government help.
Employees for whom you don’t have enough work could be encouraged to take leave or accept reduced hours. Employers need to think very carefully before resorting to redundancies.
If reducing employee numbers does become necessary, there are a range of options to consider such as tailored arrangements for those already contemplating retirement.
With so much uncertainty about, a clear communication strategy is essential to maintain connections with employees. Share details of the actual and possible future business impact of COVID-19. Ask not only for employee support, but also their ideas on how the business can get through this.
On the HR front, there are many sensitive issues such as crafting policies for:
- Employees who express a desire to avoid workplace contact with others
- Situations where a worker is feeling unwell or is suspected of being unwell but is still showing up for work (e.g. because of limited sick leave entitlements)
- Reduced hours employment arrangements and
- Leave without pay.
Check whether your IT systems facilitate working from home arrangements and video conferencing. Are employees adequately trained to use such tools effectively in a way which reduces cyber risk?
For contractors, review contract terms to determine the rights and obligations of the respective parties.
2. Cash flow is king
There are a number of things businesses can do to manage their cashflow.
It is recommended to get advice, including from a Chartered Accountant, to help with budgeting, eligibility and other requirements for government assistance packages and with a strategy to survive and then thrive.
Businesses also should make formal approaches to banks to revise their financial borrowing and extend overdrafts and other financing. And think ahead – plan for when conditions improve.
The Government has announced a number of business cash flow and tax measures, including:
- Giving Inland Revenue the discretion to remit use-of-money interest (UOMI) for customers significantly adversely affected by COVID-19
- Increasing the provisional tax threshold from $2500 to $5000 from 2020/2021
- Increasing the small asset depreciation threshold from $500 to $1000 — and to $5000 for the 2020/21 tax year
- Allowing depreciation on commercial and industrial buildings from 2020/2021
- Removing the hours test from the In-Work Tax Credit (IWTC) from 1 July 2020.
Shorter term measures such as wage subsidies give affected businesses some ‘breathing space. The tax changes encourage medium to longer term investment to stimulate business recovery.
Typical pump-priming responses to downturns will come into play, such as promotional offers and discounts, but be wary of incentives which offer delayed payment arrangements. At times like this, cashflow is key.
Other tips include:
- Manage debts owed to your business proactively
- For debts owed by your business, contact suppliers and seek their support. Landlords may be open to temporary rent reductions or lease variations
- Review all planned outlays on inputs such as consumables, trading stock and equipment.
3. Review your supply chain
Talk to critical suppliers about their ability to deliver reliably. Consider temporarily seeking alternative suppliers where the current business supply chain involves countries severely impacted by COVID-19.
Network with similar businesses to see if they have surplus supplies to sell. Promote those product lines less impacted by supply chain issues.
For your customers, communication and work-around solutions are key.
Legal advice may be needed to manage contractual risk on business inputs and outputs. For example, does a contract have a “force majeure” clause and if so, does coronavirus fall within its scope. Or could the contractual doctrine of “frustration” apply to end the contract because an intervening event – COVID-19 – arose through no fault of the parties.
It is important to look beyond just continuity of supply, but also to review supply terms of payment which can impact cashflow.
4. Your online strategy
If a business is experiencing a downturn in passing trade, can the online marketing strategy be ramped up to attract a new pool of online customers?
As well as your employees, customers and suppliers may also express a preference for online engagement, so consider whether they can also be set-up with the software necessary to engage with your business online.
5. Ask for help
There are numerous sources of support and advice, including as mentioned from the Government and Chartered Accountants.
Our website has the key links for businesses.
Coronavirus resources for businesses
Essential weblinks providing information on the disease and its impact on workplaces and businesses.Read more
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