By Jonathan Amponsah CTA FCCA, The Tax Guys
Given how slowly and gradually the lockdown is being lifted there are still many businesses that will remain closed or operate at a reduced capacity for some time to come. And plenty of employees will be furloughed until the autumn.
Let’s look at actions to help you get through the current difficulties and leverage your business. Links to free tools and whitepapers are included.
Creating an Action Planner
You’ll need an action planner such as a spreadsheet listing all the government grants, loans and deferred payment options available to you. Then take a look at where you can save money (tax, agreeing longer payments terms with suppliers, rent, staff etc.) and where you can make more money (new business ideas, speeding up customer payments etc.). Also review your tangible assets. Can these be leveraged?
Applying for government help
Ask your accountant about the help available and check to see where you qualify.
For example, if you’re sole trader/freelancer there is a grant available. It’s important to understand your own financials and the scheme rules before applying. If you’re eligible, you’ll have received a letter from the government. This scheme opened on 13 May 2020 and you need to register for an online account and prepare to file the claim. It’s worth getting help from your accountant so your paperwork is right – not just on the claim, but on your tax returns also.
If you run a limited company (including one-man band companies) there is help available. This keeps changing, so watch out for the dates and deadlines. Speaking to your accountant can help ensure you include everything necessary for your business in your plan.
You will find both action planners and furlough paperwork templates here.
Cutting cost without crippling your business
Even where you have no income for, say three months, unless you plan to close your business, there are some expenses you may want to leave alone or even increase when your competitors are cutting back (for example, smart marketing).
If cost-cutting is necessary, create a spreadsheet with all your expenses and then look at each in turn and see where you can cut back. A few small cuts can make a big overall difference and will often be less damaging to the business than one or two large cuts. Ensure you understand your cashflow and what ‘target’ you need to reach to survive.
You can read more about cost cutting here.
There is also a cost reduction exercise and savings template here.
Once you’ve reduced your costs and you know where your income will come from in the next 6-12 weeks (including income from the government), you’ll have a 12-week cashflow forecast. This document is the basis of your business moving ahead. Stick to it. If you’ve decided to cut some costs – cut them. If you’re going to ramp up the marketing or add a new service – do so.
You can download an integrated cash flow forecast tool here: https://www.thetaxguys.co.uk/client-area/ Time Saving Tool to project income-expense and cashflow.
Did you know there are at least 10 areas to save tax during a pandemic? Ask your accountant about these 10 areas to see if you qualify for any. They include:
- Negligible Value Claim (Get a tax refund if an asset you purchased has gone down in value)
- Normal Loss Relief (Generate a tax refund from last year)
- Terminal Loss Relief (Generate a tax refund from the last 3 years)
- Company closure and paying 10% tax (Don’t overpay your tax bill in this difficult time)
- Research and Development Tax Credit (Are you missing out on generous tax cuts? Would your new business re-invention lend itself to tax a refund?)
- Early tax filing (File your returns early to secure eligible tax refunds)
- VAT bad debt relief (Reclaim any VAT you’ve paid on bad debt)
- Realising capital losses (If an asset you hold has gone down in value, consider selling it)
- Passing assets to the next generation (If an asset you hold has gone down in value, consider passing it on)
- Transferring assets at low values (If an asset you hold has gone down in value, consider transferring it to, say, your company)
Creating customers by looking at demand now
How can your business solve some of the current pressing problems posed by the pandemic? If you’re a services business, can you productise parts of what you do and sell these at reduced prices for now? For example, can you run your craft workshops online via Zoom etc.? Mail out the craft items and then everyone logs on to make them together.
Generating revenue by anticipating problems/trends
The way we do business has changed and some changes are likely to stay, at least for the short-medium term. What opportunities are there for you? If you’re an accountant, how can you support businesses in the coming months when they have to pay back their deferred taxes? If you’re a marketer, how are you preparing your clients with the right messaging to market their business successfully?
Download a white paper here: https://www.thetaxguys.co.uk/client-area/ based on 16 UK companies grabbing new business opportunities.
Remember that as a business owner it is important to look after your own wellbeing and mental health in these stressful times. I hope the information and resources presented here will help get you through.
About the author
Jonathan Amponsah CTA FCCA is an award-winning chartered accountant and tax adviser who helps improve businesses. He is the CEO of The Tax Guys.
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