With many of the Government backed incentives coming to an end in the next couple of months, the road to recovery remains uncertain and many are forecasting what the next 6-12 months will look like, and how we get back on track to normal operations.
There has been plenty of talk about what the recovery might look like, with economists discussing likely models. Possible scenarios include a ’V’ shaped model with a rapid recovery, or a ’U’ shaped model with a softer recovery, or in a worst-case scenario an ’L’ shape with no recovery at all.
One possible scenario which has been mentioned is a ’K’ shaped recovery where those businesses at the middle and above are seeing a positive return to business, and those in the middle and down are seeing things decline.
The sector in which you operate may impact where your business is within the curve. Industries such as technology and software services have recovered and are beginning to recruit again as they are seeing signs of a positive upturn in business. Meanwhile, retail, travel and hospitality industries continue to see a decline in recent levels, and with the end of the ’eat out to help out’ scheme last month and further restrictions placed on social gatherings of six people, these industries will continue to find it difficult to build momentum.
Most recent statistics from HMRC for 16 August 2020 state there are still 9.6 million people on furlough across 1.2 million employers, costing a total of £35.4 billion to date. With the furlough scheme coming to an end next month employers will have difficult decisions to make on staffing levels and whether to reduce payroll costs to safeguard the business. The job retention bonus scheme will give some businesses a cash injection, but with this not due to be paid until February 2021, managing staffing levels will be a key consideration for business owners.
If your business has been impacted by the lockdown and continues to be so, it is likely that turnover will have been impacted. Less cash coming into the business will require a review of costs in order to identify where you can make possible savings. Actions you can take include reviewing existing agreements or revising controls over expenditure approval limits to ensure cash flow is managed.
Depending on where you are on the curve, one thing all companies will have in common is that there will be important decisions to make in the coming months for the best of the business, and with the road to recovery likely to be a long journey, it is one you do not need to take alone.
Hazlewoods business advisers have been helping clients with cash flow forecasting to ensure they can continue to react to any changes. Our cashflow forecast spreadsheets are available to download from our website here. If you would like to discuss more about how your business could adapt and recover, please contact Dan Town at dan.town@hazlewoods.co.uk or 01242 680000.