COVID-19: a practical guide to the steps businesses can take now

The UK and Scottish governments are acutely aware that the financial impact of the lockdown on businesses, and the economy as a whole, is unprecedented in scale. In a bid to mitigate disruption, and help businesses to weather the storm, a number of new support measures have been rolled out across the UK.

Here at AAB we fully understand your concerns at this time of uncertainty and confusion. With our proud history of working with the business community, we would like to assure you of our continuing support. With that in mind we have outlined some practical measures that will help your business to steer a safe course through this global crisis.


These are first and foremost – employees are the back-bone of any business. The Government has implemented the Coronavirus Job Retention scheme to support companies to retain their workforce during the next few months. The measures will see the Government paying 80% of a furloughed employee’s monthly wages - up to £2,500 - from 1st March for the next 3 months. Funds will be paid through an HMRC portal, and it is hoped that the first payments will be made by the end of April. More details of the scheme can be found here.

  • Legal advice – Employment law is complex. Before taking any action with respect to your employees, we would always recommend you seek independent legal advice. ACAS is a reliable source of information -
  • Reduced/changed hours – The Job Retention Scheme only applies to furloughed employees who are not working at all. Based on the current information available, it cannot be used to top up the wages of those working reduced hours.
  • Working from home – If your employees have the capacity to work from home, and your cashflow allows you to pay them to do so, then make sure you test the relevant IT systems to ensure they can still do productive work.
  • Sick pay – Up to two weeks Statutory Sick Pay (SSP) can be reclaimed from the Government per employee.
  • Communication – Remember, your employees will be every bit as concerned as you are right now. Be as open and honest as you can be with them - it will help them through what is a very worrying period, and help to foster good relations going forward. Let them know what financial support measures are available to them (e.g. mortgage holidays) and schedule regular catch-ups with staff to maintain morale and team-spirit. There are lots of resources available online to help you get the best out of remote working.

Income / funding

Most businesses will see a reduction in demand for their services, temporarily restricting income streams. It is important, therefore, to maximise whatever revenue can be generated, in order to drive cash into the business as quickly and as regularly as possible.

  • Micromanage – Be in no doubt that at times like this, cash is king. Your first port of call should be to have a firm grip on your cashflow, and where possible, use accurate forecasts and projections so that you have full visibility of the impact of the crisis on your business.

Every penny counts, so drill down into your cashflow on a daily basis. Make sure you know what your expected income and cash burn for each day is. This will prevent any unexpected liabilities cropping up further down the line.

  • WIP – Review your Work in Progress and see what can be billed now and in the short-term. What is required to complete any on-going projects/orders? Is there any reason why you cannot fulfil them? Communicate with your customers and keep them updated on the status of any orders. Double check with your customers that they a) still want your service and b) are in a position to pay for it.
  • Debts – Proactively manage your debtor book in order to maximise recoveries. Remember that your clients are likely to be in the same boat, so communication and compromise are key. Speak to your clients and see when and what they can pay. If your cashflow allows it, be open to offering discounts or longer payment terms with monthly instalments. Whilst you want to generate as much cash as possible, it is worth remembering that it’s preferable to receive some payment, than risk getting nothing at all.
  • Innovation – Necessity is the mother of invention. Consider what you can do to adapt your business in order to generate income or prepare for the future. Can you optimise your online/delivery services? Are there opportunities to hire out a function of your business to another business which is needing resources? (e.g. drivers to assist with supermarket deliveries) Can any downtime be used to develop/improve your products or services so you are ready to go when normality resumes?
  • Shareholder support – Talk to your shareholders. They may be in a position to invest equity in the business, or convertible debt, if appropriate.


As cash will undoubtedly be tight, you should also look to minimise your outgoings:

  • Expenditure/creditors – Review your outgoings and see how much cash your business routinely uses. Filter your liabilities/recurring expenses by amount, frequency and whether they are critical for on-going trade. Where possible, halt any expenditure that is not vital. Get in touch with your higher and longer-term creditors – they may be able to agree a mutually satisfactory payment plan.
  • Bank/lenders – Speak to your bank/lenders/hire purchase creditors, and see if they are willing to give you a payment holiday/reduction for the next few months.
  • Landlords – Liaise with your landlord, and ask whether you can have a payment holiday, or even split the next quarter’s payments over a longer period. If you have any arrears, then incorporate these into your cashflow, and offer to pay something if you can. If you are unsure about breaching the terms of your lease, you should always seek independent legal advice.
  • HMRC – VAT has been deferred for this period until the end of June, and you will have until the end of the 2020-21 financial year to make up any outstanding balances. Speak with your tax advisor – they can offer advice about paying for any other tax liabilities you may have. Further details on this can be found here.
  • Deferrals/time to pay – Remember that any deferred or time-to-pay agreements still need to be paid. Make sure you include these in your future cashflows and forecasts, to prevent any nasty surprises in a few months’ time.
  • Communication is key – The sooner you engage, the sooner you can start working on a solution.


  • Short-term scenario plan – Forecast for every eventuality you can think of (from complete shutdown to all employees working from home) and factor in the appropriate Government support measures where applicable.
  • Resumption plan – Although we do not know how long this situation will last, aim to forecast what you want the business to look like when normal service resumes. Hopefully any damage incurred will be minimal, so this resumption plan will allow you to hit the ground running when the time comes.

Supply Chain

It is important to keep a close eye on your supply chain. In the short-term, if you can’t get goods which are business-critical, that’s going to have an adverse impact on your cashflow. In the longer-term, you need to factor any supply chain issues into your resumption plan.

  • Contracts – Review your contracts – both with your suppliers and with your customers. Do these have ‘force majeure’ clauses? If so you may be able to break them, without liability, in event of a pandemic or Government legislation. If unsure then get legal advice to confirm the position.
  • Orders already placed – Do you need this stock immediately? Speak to your suppliers and double-check that they can still fulfil your order, and within the timescales required. If you don’t need the items at this stage, try to delay your order. Remember that your suppliers are likely to be suffering at the moment as well, so try to avoid cancelling orders unless absolutely necessary, as they could be vital for their survival.
  • International stock – If you import a lot of stock or equipment then this is likely to be severely disrupted by the various lockdowns across the globe. Not only will production have halted, but there will also be a knock-on effect on shipping and customs processing. Communicate early with your supplier and see what the latest estimated delivery time is. Identify alternative, more local, suppliers in the interim.
  • New stock required – Double-check whether your usual supplier will be able to meet your requirement within the specified time-scale before placing any orders.

Directors’ duties

Whilst they may seem irrelevant in the current climate, it’s important to remain mindful of your directors’ duties and obligations. If it looks like your business may struggle to meet its liabilities as they fall due, then you have a duty to act in the best interests of the general body of creditors. Matters to consider are:

  • Wrongful trading – The danger of continuing to trade while taking on additional lending to get you through the next few months, is that it could worsen the overall position for all creditors. If losses are made and the company falls into insolvency, then you could potentially leave yourself personally liable. The good news is that the Government has relaxed this rule as of 1st March 2020, to help ease the pressure on directors. However, should any wrongful trading pre-date the COVID-19 crisis, then you would still be liable to potential legal action.
  • Unfair preferences – All creditors need to be treated fairly and on the same basis. This does not stop you seeking agreements with creditors to postpone payment/extend payment terms, but it does means you cannot pay one creditor in preference to another without sound business reasons. In particular, if intercompany or director loans or any debts that you personally guarantee are paid ahead of other creditors, these payments could be challenged should an insolvency event occur.
  • Sales at undervalue (gratuitous alienations) – You may consider the sale of company assets to help fund the business. If you have any concerns about the solvency of your company then any asset sales or assignations need to be at full market value so as to not prejudice your creditors. Always ensure that a certified independent valuation agent values any assets before sale, so you can demonstrate that the best price is being achieved.
  • Protect yourself – Get advice on your options as early as possible. Accurate forecasting and scenario planning will help you see what the potential outcomes might be. Ensure full board agreement on all matters, and minute the justification and business reasons for any actions taken.

Government Support Measures

The Scottish and UK Governments have released a number of measures to support businesses, such as grants, rates relief and the Coronavirus Business Interruption Loan Scheme. Click here for a full breakdown of what is available, and AAB’s guide to identifying the most appropriate support for your business.

What should you do in advance of seeking support measures?

  • Understand where crunch points may arise by adequately cash forecasting over the coming weeks / months – this should establish any funding gaps and allow for quick conversations with customers and suppliers on when payments are expected.
  • Understand what may be available to you – if you can, take advantage of grants, available refunds / holidays from the Government, and any available payment holidays from existing lenders or landlords. Choose these before taking on more debt.
  • Speak to existing shareholders – can they plug any gap with additional capital, possibly by way of convertible debt? They are likely to move more quickly than an external lender.
  • If you need to take on external debt, speak to your incumbent bank in the first instance – you should expect decisions to take several weeks rather than days, although your incumbent bank will know the business already. which will hopefully expedite the process.
  • In advance of speaking to lenders, and to increase the speed at which a decision is made, ensure you have / know the following:
    • Last year (FY19) full accounts, and pre-COVID-19 management accounts.
    • Financial projections – these are preferred by lenders, although not a requirement. They should improve your chances of a successful application. Projections should show:
    • How much the business actually needs in order to plug any financing gap, which will allow the business to continue ‘as normal’.
    • The period over which the debt will be re-paid, demonstrating how the business can afford the loan. This will improve its chances of approval.
    • How the funds will actually be used to address the cash shortfall, and how they will support the longevity of the business.
    • Reveal any cost-cutting measures that have taken place or could take place to improve cash flow – this could cover any grants or refunds that have been claimed.
    • Be clear on what changes you will make in the short and longer term, to help drive the business back up to pre-COVID-19 levels.

Help for the Self Employed

The Government recently announced support to self-employed individuals as the “Coronavirus Self Employment Income Support Scheme”. Funding will be given by way of a taxable grant up to a maximum of 80% of profits or £2,500 per month to those who have suffered a loss of income as a result of Covid-19. Payments are available for an initial 3 month period but will not be paid until June so will not resolve any immediate cashflow issues. Key information available on this support can be viewed here.

For more information on the practical steps mentioned throughout this blog, or any of the Government Support Measures, please contact Lyn Calder, Partner and member of AAB’s dedicated COVID-19 support team on

You can also visit the COVID-19 information hub on the AAB website here.