What steps can businesses take to navigate Covid-19? Advice from Fora’s online workshop with KPMG

April 2020

In such unprecedented and unpredictable times, it pays to get expert advice on the kind of practical steps businesses can and should take to mitigate impact. Fora has partnered with KPMG to put our Residents in touch with experts via a series of business resilience workshops and here’s what we learnt:

 

This inaugural workshop saw Fora members tune in to draw on the expertise of Divya Khurana of KPMG’s Emerging Giants team and Haroon Ahmed of their Enterprise Financing specialism. Between them they have a wealth of knowledge of both early-stage, fast-growing companies as well as businesses managing the financial stress of challenging circumstances. First and foremost, they acknowledged that the Covid-19 lockdown is an evolving situation, and this is also the case for the assistance that’s available to companies from the government and other parties. For those striving to keep up to speed with developments, the conversation was a vital snapshot of the current state of play.

 

Cash is king

“Cash is the lifeblood of any company and you must have visibility on cash flow on a week-by-week basis so that you can respond quickly to changes as they happen”.

Many companies have, of course, been significantly disrupted by the Covid-19 pandemic including issues related to reduced payments from customers, greater pressure from creditors and the need to factor in extra interest payments if the business needs to turn to bank facilities such as overdrafts. Haroon’s advice was to immediately prioritise a cashflow forecast to include:

  • – Cash to cover a 13 to 17-week period
  • – Cashflow broken down by week
  • – All cash receipts and payments
  • – Done on a rolling basis (i.e. extended at the end of every week)

Haroon continued with more practical advice for the Fora audience. The next step companies should take is cash preservation. He challenged people to consider:

  • – What non-critical payments could be delayed?
  • – What other facilities and government schemes could be accessed?
  • – How long will it take to put these measures in place and how much breathing space will it provide?
  • – What long-term impact (if any) will they have on your business?

 

Prioritise ‘No regret’ decisions

With no indication of exactly when the Covid-19 emergency will be over the recommendation to companies is to extend their runway as far as feasible, starting with ‘No regret’ decisions such as a Time to Pay arrangement with HMRC and tactical moves like deferring R&D projects with the aim of avoiding ‘Last resort’ options such as reducing staffing levels. Haroon shared that, in requesting cashflow modelling, banks were asking companies to model zero sales for a 12-week period in some instances.

 

Tap into relevant support

KPMG is closely monitoring the range of government support being rolled out to businesses and Divya and Haroon shared the latest details. Haroon said anecdotally HMRC were granting up to a 3-month deferral of payments under Time to Pay Agreements (Helpline: 0800 0159 559), while the Job Retention Scheme is also coming into effect. This will apply from 1st March to May 2020 – with the possibility of an extension – and will see the government cover 80% of furloughed workers’ pay up to a maximum of £2,500pcm. Employees must be furloughed for at least 3 weeks and KPMG expects the first payments to be made by the end of April. The government continues to release details.

There are also a growing range of grants available to companies. Among those is NHSX TechForce 19 which is calling on innovators who can support the elderly, vulnerable and self-isolating people during Covid-19. There is funding of £25,000 available to test chosen solutions. Innovate UK is also running a competition for funding of up to £50,000 for projects that benefit the wider society. The deadline for the competition is the 17th April. The Prince’s Trust and NatWest Bank have also set up an Enterprise Relief Fund for 18 to 30-year-olds.

Banks are also providing assistance to SMEs in the form of Coronavirus Business Interruption Loan Scheme (CBILS). These provide access to loans, overdrafts and asset finance of up to £5m for six years. The loan is interest-free for 12 months and a government guarantee provides additional security.  Crucially these loans are only available to businesses that would have been able to access debt funding prior to the Covid-19 outbreak, and they must have a plan in place to weather the next few months. Again, this reinforces Haroon’s advice to produce a week-by-week cash flow forecast. ‘The ask is what makes you good credit,’ says Haroon.

 

Doubtless companies and business owners have spent the last few weeks thinking of little else apart from how to navigate the extreme circumstances created by Covid-19. There are a number of important and practical steps that must be taken as soon as possible. However, this online workshop emphasised that companies are not in this alone. The assistance available from government and other agencies is developing by the day and there is, of course, the ability to draw on the expert advice from specialists such as KPMG and from across the Fora network.

Fora will continue to work with KPMG to bring our Residents and followers the most up-to-date advice. Keep an eye on your Fora newsletter for the next workshop and other opportunities to access business support.