The big picture

Businesses have faced an incredibly challenging six months and the future for some is precarious.  Restrictions are changing on pretty much a weekly basis.  For some the capacity to trade at all, let alone profitably, has been reduced dramatically. The announcement of last week’s winter economy plan will be a game changer for many.

A key discussion point on Insight Training commercial awareness programmes over many years has been the challenge for smaller businesses to work ‘on the business’ as well as ‘in the business’ – not getting too focussed on the day to day detail and being able to step back and see the bigger picture.

Businesses that plan and forecast effectively give themselves a fighting chance of survival, even if the changing operating environment means that the plan will have to be revisited and changed regularly. This is a challenge at the best of times, but really tough at the moment and clients are going to need practical help from their advisors

Cash is king

The cash flow forecast must be at the heart of the plan. Our experience is that many small business only think about cash flow forecasting when they want to borrow.  Right now, many businesses will be running out of cash quickly and may see borrowing as their only option.  The banks will need to see evidence that a loan will be repaid, that the business has a viable plan to resume trading.

Not every business can be saved so the cash flow forecast will also force directors to ascertain viability. Directors have a legal obligation to assess whether their business is a going concern.  This can also trigger a need to approach an insolvency practitioner and this must be done promptly to avoid wrongful trading.  Indeed, this might provide the business with timely advice around restructuring options meaning that all is not lost.

Help at hand

These days off the shelf accounting software packages include ever-improving tools to help small businesses to produce simple cash flow forecasts.

Amid the morass of guidance issued by regulators and professional accountancy bodies to help with this process, a very useful paper is ICAEW’s ‘COVID-19 and Going Concern – a Guide for Directors of SME Businesses.’ ICAEW members can download it from here. The guide won’t tell practitioners anything they don’t already know but it is a very useful document to share with clients to give them an insight into the important things to think about.

Key tax considerations

Our Autumn CPD programme also seeks to provide finance professionals with useful guidance. On 20 October popular tax trainer Ros Martin will present ‘Helping Clients in Difficulty’.

Ros has assisted many clients in recent months and brings her practical knowledge and guidance to the seminar. These are the key issues that she’ll be covering:

  • How a business might refinance or restructure debts without incurring tax charges. What are the pitfalls and what crucial documentation needs to be retained as evidence of the problems that a business is having?
  • Where a business is considering a more fundamental restructuring of their activities, whether this can be achieved in a tax neutral way.  Most restructuring will require some kind of HMRC clearance – Ros will go through top tips on how to present situations to maximise the chances of success.
  • HMRC are being generous (for them!) around tax collection but there is going to be a point when that generosity will start to disappear, and tax liabilities will need to be paid.  What needs to be understood so that clients know what HMRC’s powers are and how they can help themselves? A key issue, if the business is not going to survive, is that business owners will need to know what their personal responsibility is for any outstanding debts.
  • What about HMRC’s focus on tackling fraudulent Coronavirus support claims.  What should your client be doing if HMRC launch an enquiry?

This three-hour session will be essential viewing. Click here to book.