Why SME agility is dependent on great advisory in uncertain times

Government assistance is tapering, coronavirus seems to be accelerating – what are businesses to do? The answer, says Fluidly’s Caroline Plumb, is agility.

The most effective strategy for surviving times of uncertainty is agility. And there have been a few times in recent history as uncertain as the last six months. Much work was done during this time to help companies weather the impact of coronavirus (Covid-19) and, as life appeared to return to some sense of normality, businesses showed signs of beginning to pursue growth again.

But it feels as if we’re in limbo again, exacerbated by an increase in Coronavirus infection rates and the threat of stricter measures. The end of the furlough scheme, deferred VAT payments, corporation tax, and quarterly rent falling due, once again threatens to put an enormous strain on cashflow.

Approaching Christmas, businesses need to be sure they’re able to adapt to a continuously changing set of challenging circumstances, with a robust plan in place for recovery. Accountants should be their first port of call for trusted advice.

Treating the symptoms

When outlining his Winter Economy Plan recently, it was refreshing to hear Rishi Sunak speak of the importance of helping businesses with their cashflow.

The Chancellor has afforded businesses more time to repay loans, which was exactly the right thing to do. He could hardly cut and run as we hit a second wave after sinking more than £50bn into propping up businesses.

There isn’t a cure for this economic malaise, but at least Sunak is seeking to treat the symptoms with the resources he has at his disposal.

Long term issue

When the pandemic first hit, the Government acted as though its effects wouldn’t last longer than three months.

While it’s always been made clear that we won’t be safe until a viable vaccine is available, the varying Government support offerings, such as the furlough scheme and numerous loans, were implemented in the belief that our economy would begin functioning again with a reasonable degree of normality by the end of the summer.

Time for a rethink

Rather than simply batten down the hatches, businesses need to rethink any current plans they have in place.

They should absolutely consider how they can take advantage of Government support and loan schemes. Making full use of the extended Coronavirus Business Interruption Loan Scheme (CBILS) and Bounce Back Loan Scheme (BBLS), will be vital. While, personally, I have misgivings about the structure of the BBLS scheme and misuse of it, there’s no denying that for businesses needing working capital it’s incredibly attractive. Both schemes could help them make it through to Spring and the potential relief of a vaccine.

But they needn’t do this alone.

Accountants can play a vital role through timely financial advice, pressing home the importance of maintaining cash flow, and helping clients formulate a Plan B in the event of worsening economic conditions. There is a balance to be struck between moving forward and ensuring the bottom line remains secure.

Anecdotally, we have seen more of our accountant clients creating plans with Fluidly’s scenario planning feature, then sourcing pre-qualified funding options.

The combination of forecasting, planning, managing debtors, and sourcing the right type of funding will be essential and the more proactive accountants who lean-in with clients will not only keep their roster in business but secure their loyalty and trust in the years that follow.

Too many businesses leave it until too late to get the best finance deals or don’t know whether a revolving credit facility vs a term loan would be best – or even the value of their assets. Asset-based lending could be ideal for those with machinery, equipment, vehicles, and property, especially with the unsecured market likely to take a dip as lenders seek to reduce their exposure. Advised well, businesses will structure deals with lower monthly payments for the first 12 months to buy time. As accountants you understand the nuances of each product. Don’t hesitate now to share your knowledge.

The Chancellor’s Winter Economy Plan will only go so far in relieving the pain they face. But through a combination of Government support, business agility, and your advice, fewer companies will fall victim to the effects of COVID-19.

Caroline Plumb is a contributor for AAT's member's magazine, AT.