Download our Free Excel Cash Flow Tool to help you manage your finances

The early years are the toughest for new businesses with 80% of start-ups failing in their first year. The impact of Covid-19 has stacked the odds even further against start-ups and brought unexpected hardship to many established SMEs. With expert opinion split over what the new normal will look like, when that will be and the impact it will have on the economy, it’s little wonder that 69% of SME business owners say cash flow worries have kept them awake at night.

This is detrimental to your health and damaging for your business. Entrepreneurs thrive on adrenaline but to be successful that energy must be focused on your core business and you must be able to think clearly. Too much stress can cloud your judgement and lead to poor decision making.

But, how do you make sure you’re thinking straight and maintaining focus while managing your cash flow and shoring up your future?

With a plan. It’s essential that you understand your runway and your burn rate, and how to manage them. Put simply, your runway is the length of time you can continue to trade before becoming insolvent. If your cash flow shrinks but expenses remain the same, your runway gets shorter and vice versa. Burn rate is the amount by which expenses exceed cash flow so, for example, a company with a burn rate of £20,000 and £200,000 in cash has a runway of 10 months. As cash flow and expenses change, your runway changes too. But before you can formulate a plan, you need to understand where you are right now. Here, we look at the top five priorities for SMEs and how you can use them to know where your business is, and where you want to take it. Once you know the answers to both of those, you’re in a position to make clear decisions about how you’re going to get there.

1. Understand your cash flow

It sounds simple but it’s surprising how many entrepreneurs don’t have a firm enough grip on their income and expenses. It’s absolutely vital that you use a cash flow tool to manage finances. Without this knowledge, you’re kidding yourself that you’re in control of your business.

Try our free cashflow tool for Excel.

2. Reduce costs

Reducing costs is far easier than gaining new business and should be your first port of call when looking to increase your runway. Take a look at every item you spend and ask, ‘Is it worth the investment?’ Do you have too many subscriptions that offer little or no ROI? Are you getting the best deal on your energy costs? (Use comparison websites to see if you could save).

3. Use the support available

If you’re struggling due to Covid-19, there are government schemes to aid you. Have you checked what is available and what you are eligible for? You can delay VAT and HMRC fees and well as applying for grants, and there are lots of other grants available for SMEs too. But they don’t always just come to you – you need to get out there and find them. You could also ask your suppliers for extended payment terms. Delaying payments won’t save you money, but it will ease the pressure and increase your runway.

4. Create a process for chasing late payments

Not only does this put you in control, it also makes the way you manage late payments consistent. If you’re ‘wishy-washy’ about how you chase outstanding payments you open yourself to people abusing your inconsistency and ‘trying it on’. It’s not always easy to challenge clients so this is a job that you might want to outsource.

5. Review your marketing and sales process

Is your brand visible enough? If potential clients can’t see you, they won’t hire you. Are you using social media, and if so what sort of engagement are you getting? Is your website working for you? Are you front of mind for your target audience?

We're here to help...

At Thrive Business Solutions, we offer solutions to all of the above and more. If you’re worried about how your business will survive its first year, how you’ll cope with Covid-19, or if you just want to outsource your bookkeeping to give you time to focus on what you do best, get in touch today. Our business is to make your business thrive.

The Scottish government have pledged to provide £2.2 billion to protect and support businesses in Scotland. Find out how your business can benefit.

Business Support Fund

The Scottish Government are offering businesses who are currently enrolled in the Small Business Bonus Scheme or the Rural Relief Scheme a one-off payment to help their business survive the Coronavirus crisis. Those businesses in the hospitality, retail and leisure sector can apply for a payment of £25,000. All other business outside of these sectors will receive £10,000.

The payment is not repayable and is not automatic. You must apply for it through your local council website. Local councils aim to make money available within 10 days of receiving your application.

Find out more...

Rates Relief

All non-domestic properties that are occupied by businesses in the retail, hospitality and leisure business will benefit from 100% rates relief for the whole of 2020-21.

All other sectors will also receive a 1.6% discount to their 2020-21 rates bill. You do not need to apply for this relief. Your bill will be automatically adjusted by your local council.

Note that these reliefs are in addition to the existing discounts available under the Small Business Bonus Scheme.

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Job Retention Scheme

The UK government will provide up to 80% of employee's wages (up to £2,500 per month) for ALL businesses with a PAYE scheme that was started on or before 19 March.

This benefit will be backdated to 1st March and will run for an initial 3 month period. It is only available for employees who have 'furloughed', i.e. employees who have been asked to stop working but remain on the payroll.

You can choose to top up the employees salary to the their normal level or your employees may agree to a temporary wage cut.

NOTE - Applications for the job rentention scheme must be made through a portal which will not be available until the end of April.

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VAT Deferral

If you are registered for VAT, you have the option to defer VAT payments due between 20 March 2020 and 30 June 2020 until 31 March 2021. You must still submit any VAT returns due.

You do not need to apply for this scheme, just don't make the payment and cancel your direct debit if you have one set up.

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Statuatory Sick Pay Relief

The UK government will refund up to 2 weeks of Statutory Sick Pay (SSP) per employee for absence caused by COVID-19.

This scheme is open to all businesses with fewer than 250 employees for people who have been on the payroll on or before 28 February 2020.

NOTE - Although the government has made a commitment to provide this relief, the date that this scheme will be made live has not yet been released.

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Business Interruption Loan

The UK government has partnered with banks to support business loans of up to £5 million for businesses with a turnover up to £45 million.

To be successful in your loan application, certain criteria must be met including an ability to demonstrate the viability of your business.

To access this funding, you should speak with you business bank or one of the 40 accredited lenders.

Find out more...

As at 2 April 2020 Disclaimer: We go to great lengths to ensure that the information and advice we provide is accurate. Before making any changes to your business, you should read and understand the full details of the scheme, loan or benefit you are applying for and ensure that it meets your needs.

The rise of business banking apps like Starling, Tide and Coconut are creating fantastic opportunities for us small business owners. Not only are they cheaper than the traditional high-street banks (any are even free), but they are packed full of features that save us time, improve visibility and help us streamline our operations.

With business being quiet for many of us, it is the perfect time to focus on cost control. Reducing costs is far easier than increasing sales (especially now that we are in the middle of a pandemic). Switching your bank account may be one of the easiest wins.

I spend at least an hour every month updating my cash flow forecast and looking for ways in which I can minimise costs. Up until last month we were spending over £40 every month on bank charges. What were we getting for that? Not a lot!

Using sites like Which, MoneySupermarket and KnowYourMoney, I decided to look at what these new banking apps had to offer. There are heaps of companies now offering attractive services, so make sure you do your research and choose one that matches your business needs. For example; Do you need an overdraft facility? Do you need it to integrate with your invoicing or accounting applications? Do you need to make regular international payments? Do you regularly deposit cash? I decided to switch to Starling Bank due to it's free banking offer and integration with Xero. It took minutes to set up my new bank account and I'm now saving over £300 per year in banking fees. I've also managed to streamline my accounting and invoicing process, saving me time and inproving the service I offer to my clients.

The switching process was easy using the Current Account Switch Service (CASS). To check if your bank participates, just go to the CASS website.

So, why not spend an hour or two this week researching how your business can benefit by switching your banking service.