Chris Downing, Director of Inspire, the business and tax advisers, answers your questions.

Question: My business is struggling with cashflow at the moment, what should I do?

The first thing to say is that you’re not alone!  One of the biggest challenges for businesses in this post-lockdown period is cashflow management.  Although many are now seeing activity levels starting to pick up again, you need to be aware of what the working capital needs are going to be, in order to increase your levels of activity.

• Make sure that you have your costs under control.
• Categorise your overheads into those that are vital to business operations and those that are discretionary or even luxuries. Question the latter and do they give you a return or benefit?
• With the furlough scheme coming to an end on 31 October, many businesses have been closely scrutinising their ongoing payroll costs. This may mean re-focusing people’s roles and potentially making some tough decisions.
• Forecast, forecast, forecast! Try predicting what the future cash looks like to the best of your ability. Cashflow forecasting can be as complex or as simple as you need it to be. One page or several pages, as long as it tells you what you need to know; with the forecasted level of activity what will the bank balance look like after taking into consideration predicted receipts and payments? A number of commentators talk about a thirteen-week review period. I agree with this, but feel that consideration should also be given to weekly and annual forecasting too. With the information that you have at present, what is your bank balance predicted to be at the end of the week, at the end of three months or even at the end of the year?
• Having considered your forecasted cashflow requirements, do you have the correct level of funding in place? Now is the time to talk to your advisors including your bank manager, who will be able to walk you through this thought process. It’s important that the right type of funding is in place in terms of structure and of course, pricing! Simply having an overdraft is not always the answer.

If you need help with this, do get in touch with the team at Inspire.

Question: Is it too late to apply for the government’s funding to support businesses dealing with coronavirus?

Many of the government’s financial support measures for businesses are still available, if your business has been impacted by Covid-19. However, the deadlines for final applications are approaching soon, so my advice is to think quickly and take action as soon as you can, if you think you need support from one of the schemes.

The Coronavirus Business Interruption Loan Scheme (CBILS) is designed to provide support to SMEs who have lost revenue or had their cash-flow disrupted as a result of the pandemic.  It’s open for applications until 30 September for eligible businesses with an annual turnover of up to £45 million. The government guarantees 80% of the finance to the lender and pays interest and any fees for the first 12 months.

Bounce Back Loans are available until 4 November for SMEs to borrow between £2,000 and up to 25% of their turnover.  The government guarantees 100% of the loan and you won’t pay any interest or fees for the first 12 months.  After 12 months, the interest rate will be 2.5% a year.

There’s more detail on the eligibility criteria and applications process for CBILS and Bounce Back Loans available from the British Business Bank.

Don’t forget that if you furloughed staff between 1 March and 30 June for a minimum of 3 consecutive weeks, you are still able to claim a grant under the Coronavirus Job Retention Scheme for those members of staff.

From 1 September, the grant reduced to 70% of wages (up to a maximum of £2,187.50), meaning that employers have to pay the top-up.  From 1 October the grant reduces to 60% for the final month of the scheme.  You can read more about what you can claim under the scheme and options for part-time furlough in our blog here.

Question: Is there anything I can do to improve my business’ credit score?

It’s always worth checking, and therefore knowing, your credit rating, as well as that of your customers and clients.  One of the major credit rating agencies changed their scoring algorithm back in December 2019 and this affected all companies scoring on their platform, so if you have noticed that your score is different to what you expected, that might be why.  There are a few things that you can do, to try to improve your score:

• Check that the company has the right Standard Industrial Classification (SIC) of economic activities code, as recorded at Companies House.
• What did your last set of company accounts filed at Companies House say about your business? How strong was your balance sheet in comparison to the previous year?
• What do your suppliers say about you?
• Talk to the credit rating agency, understand their scoring system, do they need more information that could benefit your score?

My colleague, Andrew Singleton, recently wrote a blog on this topic, which offers more details and top tips.