Hentons Chartered Accountants; Where Your Business is Our Business
14th October 2020
Hentons Partner Tim Baum-Dixon gives his latest advice on business finances during the COVID-19 pandemic.
A Changing Business Landscape
"As the UK bravely faces up to Covid-19, the business landscape continues to quickly shift. Uncertainty grips the nation as government guidance rapidly changes. However, we have already seen reasons to be hopeful, with business on the up in many industries, and remote working having proved itself as a viable option for many businesses.
But one thing’s for sure – the pandemic will be with us for the foreseeable future.
Businesses need to take positive, forward-thinking steps to successfully navigate the next weeks and months. It has never been more important to have agile systems in place, to know your numbers and plan for the future. But how can you create a plan with so much uncertainty in our world today?"
Having the Right System
"The cloud has been with us for while now and more businesses are utilising it for different business systems. Businesses have come to recognise the added security and costs savings through the cloud; for example, it removes the need for data to be stored on host systems, internal servers and hardware. Accounting software like Xero and its ecosystem of cloud-based business applications have been revolutionising the accounting sector, delivering significant time and efficiency savings for several years now. Making Tax Digital pushed these systems forward as a way of complying with these new regulations. However, for many businesses, moving to the cloud has not been a priority.
With the onset of the Coronavirus Crisis and subsequent lockdown earlier in the year, many businesses have found themselves unable to have staff in the office. With new restrictions now in force, office staff are being asked again to work from home where they can. Those businesses with desktop-based accounts packages and paper-based processes have found this period difficult; the benefits of having electronic, cloud-based accounts systems and processes have never been clearer.
Businesses that had already embraced the cloud revolution have been able to adapt to the current situation. Their accounts can be accessed from home; their bank is automatically linked; invoices are scanned (meaning office filing cabinets are now being made redundant!). Suppliers can email in invoices to them; if purchase orders and approval processes are needed, these can be automatically work-flowed using systems like Approval Max all online. Even payment runs can be processed directly from Xero; sales invoices can be sent out and payments collected by direct debit using GoCardless.
For those who have embraced the cloud for internal systems, things have still been hard, but they have been able to adapt more quickly. They have been able to carry on their business processes; not only that but they have had important information at their fingertips – no matter their physical location - to make informed business decisions."
Understanding your Numbers
"The key to surviving and thriving in the current climate is the ability to make quick, decisive decisions based on solid information. In fast-moving situations like those in which we find ourselves, it is important to understand how your business is doing, where it is making money and where the business is leaking funds and incurring expenses. Businesses should always do this, but it is easy to neglect this in the good times. However, it is now mission critical for your business.
When businesses accessed CIBIL (Coronavirus Business Interruption Loan Scheme) support for the first time, the first thing that lenders asked for was management information; not just the previous year’s accounts but what had happened in the 1-11 previous intervening months. Many businesses struggled to get this information; this held up applications, causing frustration from both the business and the bank.
Those that had good management information were able to prove that they had a strong business quickly; they knew their numbers and how they were doing pre-crisis. They could enter the uncertainty well informed and able to make good decisions quickly; they were agile and adaptable. They could easily make their case to lender for borrowing; they had solid foundations and historic trends to look back to and evidence on which to base their forecasts. All of this provided credibility, confidence and gravitas to loan applications, which on the whole went through much faster."
Creating a Financial Forecast
"A financial forecast can help you to plan and make more informed decisions around the management of your business. It looks at management information and trends, taking into account your forecast revenue and costs over a set period. A period of 6 to 12 months is generally a good place to start. Whilst anticipated revenue might be difficult to predict in the current climate, by having a good understanding of your past numbers, coupled with your innate knowledge of how your business operates, you should be able to produce credible predictions. However, for the purpose of the forecast, your costs are the most important consideration. You will be able to make a more accurate prediction if you mainly have fixed costs in your business, but again if you have a firm understanding of how your business operates and a strong grasp of your numbers, you will be able to plan and forecast ahead.
You should update your financial forecast as frequently as possible to make more accurate future predictions. Ultimately, your forecast will help you to make more informed and therefore better business decisions."
Getting the Right Help
"Do you have someone on hand to offer you advice, as and when you need it? Do you sometimes feel like you are navigating your business’ financials blindly?
It’s not uncommon to feel on your own as a businessperson. At Hentons we believe there is a better way.
We believe in providing our clients with the service and tools they need to project their business forward – global pandemic or not! We offer accountancy with a difference; we give our clients the best advice possible, using the latest technology. We have experts that are based locally and know the Sheffield market well, but also have national expertise to draw on. We have a broad offering of services - from management accounts, full outsourced finance, payroll and FD support, through to funding, taxation and accounting system and software support. We also offer financial planning and pension through our team of experiences financial planners and wealth managers."
Setting Your Sail Towards Success
"The decisions you make now will affect your business long after the Covid-19 pandemic. We would love to help you to navigate through these unchartered waters and steer you towards the success your business deserves."
If you would like to discuss how Hentons can help you and your business, contact them today.