1. Do your financial forecasting as this will allow your business to quickly adapt to changing positions and help you make more informed decisions. Read our article on tips on preparing projections here.
2. Prepare a detailed monthly cash flow for the next 12 months. Stress test any assumptions to highlight the exposure to risk and the impact of measures.
For businesses with multiple activities or revenue streams, understand which areas will and won’t be profitable. Factoring in the available Government support will be key.
Assess stock or work in progress. There may no longer be the same level of demand for stock and work in progress, depressing its value and the prospect of generating this into cash. For businesses such as professional firms charging on a time basis, the productivity of workers should also be considered where there has been disruption or reduction in efficiency.
3. Make accounting provisions for future costs and impairments including redundancies or onerous contracts. Getting tax relief a year earlier or to recognise impairments to stock, WIP, goodwill etc, will reduce your current tax liabilities.
4. Consider changing your financial year end as it might make sense to have the period of Covid-19 covered by one accounting period, rather than straddling two. A change in financial period end could impact on tax liabilities, reliefs and payment dates.
5. Safeguard your assets taking into account insolvency legislation as decisions made now could be subject to later scrutiny. Where a business is exposed to significant risk, consider whether assets (e.g. freehold property) could be moved out of the trading business into a parent or personal ownership, via a holding company or extraction through a loan account. A de-merger may be relevant where different elements of a business have different risk profiles, in order to reduce the risk of one business line’s failure affecting the others.
6. Consider incorporation as a limited company, this was popular after the financial crisis of 2008 as it changes the risk exposure to business owners and may provide tax or cashflow benefits. However, if you are receiving self-employed income support – it may not be sensible to incorporate currently.