Surviving Covid-19: Re-opening To The New ‘Norm’

Welcome to the first of our Surviving Covid-19 articles for business owners. These articles focus on all the current and future challenges faced by small businesses as we emerge from a year of lockdowns and crippling restrictions. They also discuss possible solutions that can help small businesses cope with the new environment and the uncertainties that come with it. 

The Chancellor’s budget has allowed for further extensions to business rates, VAT and PAYE holidays which of course is welcome news to frustrated business owners, unable to operate or adversely affected by the Pandemic. Add to this the ever-improving rate of Covid cases and the planned re-opening of non-essential businesses in April, one has reason to feel cautiously optimistic. But re-opening to what is a completely different world to pre-pandemic times, the level of uncertainty for many business owners is unprecedented. 

Tax, business rates and rent – it’s payback time  

The tax and business rate holidays have certainly provided essential help for businesses along with the moratorium preventing landlords from evicting business tenants affected by the pandemic for non-payment of rent. But with all this coming to an end within months from now, there will be many looking re-coup lost revenue as a result of these provisions. Indeed, many landlords have run-up debt themselves having only received irregular rental income from struggling business tenants. 

Continuing restrictions 

As if business owners don’t already have enough on their plates, when everything does re-open there will still be many restrictions in place that will last for months and well into next year. These restrictions will affect revenue for businesses such as limits on seating, venue capacity etc. So how can businesses best prepare for the many challenges they face re-opening in these murky times? 

How much revenue do you estimate each month? 

Start with estimating how much sales revenue your business is likely to receive for the next 6-12 months and then put this against your running costs. Our Business Budget calculator can help you get an approximate idea of how much revenue your business will or will not have after deducting costs. Take care not to over-estimate revenue, especially if your business has not been trading at all during the lockdown. You can always revise your estimations in your projected sales income if actual revenue is being exceeded in the first couple of months of re-opening. It is also much better to be revising upwards instead of downward as the latter may impact on your budget planning for running costs. 

Prioritise your expenses 

If you have less revenue than is required to pay for all the costs, you will then need to prioritise what costs are the most essential to your business. This is not to say that some costs are less important than others, after-all, they all ave to be paid. However, there are costs such as rent that must be paid otherwise you may not be able to operate your business at all. In contrast, liabilities such as tax can be paid by negotiated amounts agreed with HMRC. Therefore, it makes sense to take advantage of costs that can offer some degree of flexibility that can be used for essential costs that need to be fully paid.

What can your business afford to pay? 

As already mentioned, there are some costs that can be paid through agreed arrangements. So after you have decided what costs must be paid in full, divide the remaining amount amongst the rest and there you have your budget plan.

 Negotiate arrangements with creditors 

 Of course, your budget plan needs to be agreed with those that cannot be paid in full, so you now need to contact them to make your offers. Do make your offers in writing so in case any creditor wants to take action for not receiving full payment, you will have the evidence to show you did try to mitigate the matter by offering a payment arrangement. 

Consider formal arrangements if necessary 

Most creditors, including HMRC, will agree to paid arrangements provided they are reasonable and maintained. If the situation is such that you are not able to offer what may be reasonable, you may have to consider an insolvency solution as your business is technically ‘insolvent’ wherein the business is unable to pay for its own running costs. Taking this direction is a big decision and should only be considered if you have no other choice. It does not necessarily mean you will have to cease trading and it is possible to maintain all your business assets.

Such solutions can be in the form of an individual voluntary arrangement (for sole traders/partnerships) or a company voluntary arrangement (for limited companies). Information can be found about these arrangements is on this website, however, in our next article we will be discussing how these arrangements may work for  struggling businesses in this new environment of living with and managing Covid-19.