- Invoice factoring – this is a short-term financing method which allows a business to sell an outstanding invoice to a third-party. The third-party will take a percentage of the value of the invoice and pay you the difference. Be aware that your client will know you are using a factoring service.
- Invoice discounting – this is similar to factoring, but you will retain control of your sales ledger and ensure the debt is paid by your client. Due to the higher risk for lenders, this option is typically only available to those with a turnover of £100,000 or more. Using this method also means your clients will not be aware of any changes in your financial arrangements.
- Business protection insurance – while your business is still in a strong position, it may be an opportune time to put in place business interruption insurance or credit risk insurance. It is true to say premiums will be on the up currently, but if you are accepted, the peace of mind offered may be invaluable.
- Implement tighter credit control policies – review your current payment terms and credit controls – implementing tighter controls may be beneficial for ensuring the flow of cash into your business.
- Reviewing your T's and C's to – In line with your credit control measures, it is advisable to see if your terms and conditions contain remedies for late payment or failure to pay. Such terms may provide useful leverage in ensuring payment is made.
- Terminate or delay contracts – depending on the nature of your contracts, your obligations, and the overall impact on your business, it may be that some contracts at the current time represent a risk to your business and you may already be reviewing whether they can legitimately be cancelled or delayed. For example, contracts which incur high business costs for which payment may only be received from the customer once the customer is satisfied that delivery is complete many months from now.
- Debt recovery procedures – no business wants to resort to using debt recovery measures, however, if your business is suffering as a result of non-payment, you may need to consider issuing a claim letter and Statutory demand.
- Negotiating rescheduled payment/payment holiday – creditors are likely to be very understanding if you maintain communication and explain any delays in payment. Speak to your creditors to see if they will allow you to pay later or pay less.
- Leverage the Government's Budgetary assistance – in the recent budget speech by Chancellor Rishi Sunak, a number of measures were announced which should be used where possible, including business interruption loans and/or business rate relief, the HMRC "time to pay" agreement, grants for small businesses, and reclaiming sick pay.
- Speak to all of your clients – Don't wait to be told by your clients that they need to cancel your services. Engage with them early to ask them to maintain a line of open and honest communication with you and let them know that if they are struggling at any point in the future, you will do all you can to assist.
More about Coronavirus
Taking more serious decisions
- Self-managing a voluntary liquidation
- Enter into a Company Voluntary arrangement (CVA) - re-arranges the company's debts (with the consent of creditors), keeps the business trading, allows the directors to remain in place, and may create a temporary moratorium on debts
- Entering into a Scheme of Arrangement with creditors (similar to a CVA)
- Entering into Administration - provides a moratorium against creditors whilst the administrator tries to rescue the company
- Entering into a pre-packaged administration ('pre-pack') - the business and its assets are sold before an administrator is appointed
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