“This too shall pass”

If history has taught us anything, it’s that the only constant in life changes.

Over the course of the last century alone there has been a litany of challenges and numerous disasters, all of which have one thing in common – they’ve all passed.

Some months from now – it’s impossible to predict the true timeline – the current situation we face with Covid-19 will too have passed. It will have left in its wake a trail of debris and destruction which we ought not to minimise, but it will pass.

As the great German writer, Goethe once said: “Fresh activity is the only means of overcoming adversity.” It’s a wonderful way to focus the mind on proactive, practical activity and look forward. To deal with things that you can influence and change rather than those you can’t.

As Finance Directors part of our role is to use our knowledge of the past and translate it into actions that bring about a better future.

With 750 of us in the UK and abroad, many of us spanning 3 or even decades of service to SMEs, we have weathered many storms. We’ve also come out the other side.

And we have learned from those experiences that there are certain actions we must take quickly if we want to overcome adversity and put ourselves in a stronger position for when the storm abates. In the midst of the storm, it can be difficult to make sense of what is happening. This is precisely the time to slow down for a moment, as hard as it may seem, and make some proactive decisions.

To address the negative, we can take it as read that the speed at which many industries will contract over the coming weeks will increase. Primary industries such as aviation, travel and tourism, events and conferencing, restaurants and pubs, will suffer devastating blows as will the supply chains they support. The ripple effect will affect everyone, in some way or another. These events are already in train.

While all that happens, as SME owners, we have to do whatever we need to do in order to weather the storm and come out stronger on the other side.

And you don’t have to face that challenge alone. There’s a lot the government and banks are doing to help small to medium-sized businesses get through the challenges of the coming weeks and we’re also here to help you navigate the options and put you in the strongest possible position when some sense of normality is restored.

Below are some key considerations, risks, opportunities, and resources. If you would like us to help you navigate the options, we are offering a courtesy 1:1 Scenario Planning Call to help you get clarity around what you should be doing now to put you in the strongest possible position.

Protect the downside

Cash

Cash is king. What cash buffer do you have in place, what funds can be drawn down from available credit facilities if required? From March 11^th the government is pledging £30bn. This covers welfare and business support, sick-pay changes, and local assistance. In relation to business, the support includes:

• £2bn of sick-pay rebates for up to 2m small businesses with fewer than 250 employees
• £1bn of lending via a government-backed loan scheme, with government backing 80% of losses on bank lending
• The abolition of business rates for this year for retailers (a tax cut worth more than £1bn)
• The provision for any company eligible for small business rates relief to be allowed a £3,000 cash grant, estimated to be a £2bn injection for 700,000 small businesses

In addition, here are just a few key resources you may be able to draw upon from the major banks:

• Barclays has a range of options for business customers, including 12-month capital repayment holidays on existing loans over £25,000 and increasing overdraft facilities
• RBS has said it is offering more flexibility over loans to businesses, suggesting repayments may be deferred by up to three months for those in financial difficulty
• NatWest has pledged £5bn Working Capital Support for SMEs during the Coronavirus outbreak
• The Lloyds Banking Group said it would be open to requests from small businesses for overdraft extensions and other support

Scenario Planning

• If you are predicting a reduced demand what will be the impact on sales and cash?
• What costs can be cut or deferred? Is there flexibility in the cost base that could partially offset a downturn in revenues?
• Are there major capital expenditures that could be postponed?
• Over what time period might you expect revenues to be reduced?
• What impact might you expect in regard to late payments from your existing customers?

Supply-side:

• Are you likely to be impacted by a break in the supply of inputs/services from other businesses struggling with the virus?
• How much contingency are you holding if supplies of inputs stopped/became erratic?
• Are there alternative sources of supply if a supplier fails?
• What is the likely impact on the workforce – do you have a business continuity plan, can workers productively work from home/remotely?
• Could you look at taking measures now to reduce the risk to your workforce; e.g. more virtual meetings rather than asking staff to travel?
• Are you operating in an area which could be impacted by “lockdown” measures e.g. city centre, does the workforce travel largely by public transport (impact if closed/restricted), would the travel patterns of the workforce mean it would be necessary, for staff safety, to suspend travel to the head office/main site.

Demand-side:

• Potential impact on sales volumes – e.g. what is your level of exposure to consumer demand, are you B2B or B2C, are your corporate customers likely to be significantly impacted (airlines, cinemas, hotels, restaurants, attractions, events, etc.
• Any delivery issues for goods/services?
• What are the contractual implications of failure to service customers (do they have a force majeure protection in contracts?)
• Does the client have contracts that enable clients to claim force majeure and cancel commitments without penalty – the worst case what might this mean in terms of the liquidity scenario planning.

Communications:

• Who should you be contacting new – suppliers to see what contingency plans they have, customers to reassure, other stakeholders?
• If someone has an issue, do they have the means to communicate with you?
• Can you post messages on your website remotely if required as a means of keeping customers, suppliers notified?

Staff:

• What is your policy on sick pay if staff have to self-isolate (the Government has announced the availability of SSP from day 1 of self-isolation but does your policy mirror that?)
• Are there contingent measures that can be put in place to bring in temporary staff if necessary?

Miscellaneous:

• Any business-critical single points of failure?
• Can you switch your office phones to an alternative line?
• What insurance arrangements do you have in place?

Prepare for the upside

All of the suggestions mentioned above constitute the day-to-day role of an FD. These are things that companies ought to be doing as a matter of course, but of course, many do not.

The advantage of going through this process now is that it will enable you to build a better, stronger, more resilient business for the future. Whether Covid-19 or the next major recession or some other unforeseen event, knowing that you have done all that you can to prepare your business will give you greater confidence in the future.

The future of work is all about remote working, flexibility, greater specialisation, and outsourcing. The Coronavirus will increase the pace with which we transition to a new global model.

We encourage you to be cautious and use this time to spark ‘fresh activity’ and build a stronger, leaner business for the future.

We are here to help and are offering 1:1 Scenario Planning Consultations to help you make the right decisions to get you through the coming weeks and prepare you better for when the current madness subsides.