Earlier this month (5 January 2021) the Chancellor announced further support for businesses during the latest National Lockdown. Included in the announcement were: a £4bn top…
This weekend, pubs and restaurants will open their doors for the first time since 20 March and the Centre for Economics and Business Research is projecting that £210m will be spent this weekend alone. For businesses that have been fully closed or operating at limited capacity for over three months, this seems like too good an opportunity to miss; however it is not that simple.
The fundamental question these businesses will need to answer on reopening is whether the business can trade profitably and be cash positive, whilst complying with restrictions imposed by social distancing, given the uncertain level of demand.
Owners will need to decide whether to open at reduced hours and capacity, with potential to scale up operations if demand is higher than anticipated or open at full hours but be willing to scale back operations if demand is not as high as initially anticipated. There is no right or wrong answer to this but the willingness and ability to adapt to demand will be key in helping minimise costs. Flexible furlough will be heavily used as businesses look to adapt to demand in the ‘new normal’.
Potential relaxation of the 2m rule to 1m will help increase capacity and some pubs have the benefit of larger outside seating areas but those without will need to think of more creative ways to maximise revenue on reopening, such as takeaway pints.
Safety of customers and bar staff has to be priority; the costs of PPE and steps to make establishments COVID secure represent a significant cash outlay, especially for more seasonal businesses who would have been struggling to generate cash before lockdown, as well as the ongoing costs of monitoring and recording customer details to deal with risks of potential outbreaks.
Practical tip: divide your staff into multiple teams and keep these teams working the same shifts together. This combined with rigorous cleaning practices means that if there is a possible outbreak, it is isolated to one of your teams and will minimise disruption to your business.
Cash management and dealing with any debts that may have built up during lockdown requires very careful consideration. Priority should be given to paying the ongoing necessary business costs first and use surplus funds after this to pay historic creditors, making sure to treat all creditors equally when paying them.
It is important your business is at least generating some cash to make inroads to historic debts. Whilst directors benefit from a suspension on personal liability for wrongful trading (where they knew or ought to have known that their company was insolvent and had no prospect of returning to a solvent position) between 1 March and 30 September 2020, their duties to act in the best interests of creditors remain as do penalties for breaching these duties. Therefore, if trade after 4 July is not breaking even, creditors are becoming worse off.
There are a number of options available for businesses, designed to help them as they unlock over the coming months. If you are concerned about the viability of your business as well as the best options available, a COVID Restart Review can help give you clarity and provide you with options to take your business forward.