After the Prime Minister’s roadmap was outlined to the public, it now feels as if there is a light at the end of the tunnel for a somewhat return to ‘normality’. For many struggling business owners, however, there is still some uncertainty.
The dates given were all subject to change if the data reflects a rise in COVID cases. For this reason, many surviving businesses need to act fast in order to save their business throughout the rest of the 2021 pandemic – hopefully, this will be the last leg of the struggle, which will be a relief for many. In this piece, we have rounded up 5 tips for how business owners can future-proof their business from the team at Insolvency Experts.
Keep your team in the loop
Keeping your team in the loop is essential. Many may be concerned about job security, especially for those in the hospitality industry who have been on furlough for some time. Communicate your plans often and make sure to check in with them. Be honest and don’t let their minds wander about whether they will still have a job a few months down the line.
Understandably, many business owners have been hoping for further support packages from the government, but it is important to bear in mind that these loans and grants are simply delaying the inevitable for surviving businesses who have been especially affected by the pandemic. Although you’d want to hope for the best after building the business from the ground up, in reality, we are going to see many closures in the coming months. This can put you in the right frame of mind to take action as soon as possible.
Most businesses have now used up the bounceback loans that they received at the end of the first lockdown, and we don’t fault them for this – businesses had to act fast to avoid serious consequences, and we could not predict future restrictions. Businesses still need to pay for rent, heating, insurance, subscriptions, and staff salaries if they have not been furloughed, and this has been enough to push some businesses into a very difficult situation.
If you are looking at your financial forecast and realise you are running out of money quickly, you need to act fast. The sooner you act, the more options are available for your business.
Tying in with the above tip, seeking assistance early will mean there are more options for you, rather than burying your head in the sand and burning up vital cash. If you are the director of a business that was just surviving pre-pandemic and have a personal guarantee, this is especially important. If you go past the point when you should have sought advice, you can actually be charged with wrongful trading, meaning you are personally responsible for the situation. This means you will become liable for a certain percentage of the debt that the business is in, and can even be disqualified from being a Director for up to fifteen years.
Seeking assistance from either your accountants or getting in contact with a specialist insolvency business can help you step away from the emotional involvement you naturally have in your business and can help you be realistic about staying afloat. Getting in touch early whilst you still have cash left will mean there are more options to take. Experts can also provide advice before you approach creditors, for example, they can provide you with advice before you contact HMRC about outstanding debts.
It may even end up that you are very tired of running the business and are looking for a new venture, which is natural – being a business leader in trying times can be exhausting. In this instance, insolvency practitioners can assist with your exit.
Consider your options
There are a few other different options available if you are struggling, such as members’ voluntary liquidation (MVL) and company liquidation. The MVL process is often chosen as the best option by shareholders who have built up sufficient reserves within their business and no longer need to work with the company. It enables the business to be wound down and closed properly. This can provide significant tax advantages if the appropriate criteria of HMRC are met.
Whilst the process enables the company to be wound down and closed properly, providing the appropriate criteria of HMRC is met, there is a range of potentially significant tax advantages that a Members’ Voluntary Liquidation can provide for shareholders.
Company liquidation is the best route to take when there is no option to sell the business or part of the business as you have serious cash flow problems and creditors are threatening to take enforcement action against the company.