Aftermath of COVID-19
Wow, what a journey 2020 has been so far and it’s not over yet.
Is it hopeful to say that we as a nation and a world, will ‘hopefully’ never experience anything like COVID-19 again in our lifetime? Perhaps, meaning now is the time to attempt to ‘recession proof’ yourself and your businesses.
If together we can forward think about the aftermath of COVID-19, I believe we can devise a plan of how to come out the other end.
No one can underestimate the effect of COVID-19, it’s effected our children, our livelihood, our education system and our economy, our businesses.
We are not short of articles highlighting the devastating impacts of COVID-19 on our economy, the aftermath is set to see us as a nation, stuck in what will be the deepest recession since records began.
The question is, how can we bounce back as individual businesses?
Speaking of ‘bounce back’ loans, these alone could and will have devastating impacts if not used in the right way; I will talk more about these in my follow up article. For now, I want to discuss the impacts of COVID-19 on our businesses.
Pre COVID-19 we were seeing a large amount of struggling businesses, in my opinion, we as a nation were heading into a recession; COVID just pushed us over the edge.
Leading up to COVID-19, we were seeing record numbers of businesses resorting in Voluntary Liquidation; essentially closing down the business, writing the debt off and starting again.
Voluntary Liquidation may seem drastic to some however if you feel your business is in a state of insolvency (overheads and debts exceed income and assets), its possibly the only option.
What now for businesses?
My first question is… How will the government recover the monies lost and borrowed, most of which is expected to go unpaid? My prediction, an increase in taxes!
An increase in taxes for an already struggling business is going to further squeeze profit margins and cash flow; especially if the business factors in unpaid debts and creditor commitments.
Secondly, how many businesses have gone at least 1 quarter (possibly 2) without paying VAT? How many businesses have missed PAYE payments? How many unpaid corporation tax bills have gone a miss?
My question, how will the HMRC recover these funds? Especially when businesses are struggling to survive as it is? The HMRC are certainly in no position to let the debts ‘slip’ and go unpaid.
My concern, to what lengths will the HMRC have to go to recover these funds?
Will the HMRC accept businesses not paying them back but taking out further lending in an attempt to survive?
I appreciate the rules around trading insolvently have been loosened however there becomes a point where a director must take responsible steps to resolve the company money worries and prevent other businesses from being financially and negatively impacted by a failing business.
Now, just because your business is struggling it doesn’t mean that it is a failed business model. COVID-19 has brought some of the best businesses to its knees, what’s important is how you bounce back.
What to look out for
If you want to build a business of the future, here are some questions I would urge you, the director to ask yourself:
- Was the business struggling before COVID-19?
- Did the company have money worries before COVID-19?
- Has the business built up more debt during COVID-19? HMRC debt included)
- Do you foresee your business to recover from COVID-19?
- Is the business able to build itself back up to being able to make a profit and pay back its debts?
My advice is, come out of COVID stronger that what you went into it!
If that means pressing the reset button and devising a plan on how to resolve the company money worries, then so be it.
Having a business that has little to no debt is the best way for a business to have a chance of surviving in what is already a unpredictable economy.
Here at Company Money Worries we are passionate about supporting both the business and the director(s) back to strength.
We are here to guide you, the director back to success. Get in touch today.
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