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Coronavirus: How accountants can prepare for a crisis

As the coronavirus spreads across the UK, businesses face a pessimistic start to 2020. Richard Murphy explains how accountants can help businesses survive the outbreak.

6th Mar 2020
Founder and blogger Tax Research UK
Columnist
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Coronavirus
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One of the advantages of reaching a certain age is that you have lived through a crisis or two. I have. I recall the 1987 crash, the downturn of the early 90s, the dot-com crash and, of course, 2008. But, having noted that, I rather strongly suspect that what is to come as a result of coronavirus might outdo all of these.

To be blunt, I doubt that there is a business in the UK, excepting undertakers, who can look forward to the rest of 2020 with any degree of financial optimism. The simple fact is that just as some people will die if the coronavirus epidemic spreads, so too will some businesses fail. And, in the case of business, the best precaution is not handwashing whilst singing happy birthday.

So, what precautions might be put in place? This might depend upon the sector you are in, the state of your balance sheet, the level of gearing that you face and what complications there are in your supply chain, but whatever the state of those I suspect that there are some things that most businesses could begin to plan now.

One question to ask is how people in the accounts department could work remotely. Do people have appropriate laptops for this purpose, and can they still be bought whilst some are still available? Are secure connections available? Can a VPN be created? These are all questions that can be addressed now. And they are important: keeping data flowing within an organisation is almost as important as keeping cash flowing.

Cashflow, however, will be the greatest concern for most accountants and accounts departments over the next few months. I really cannot see a way around this. Contingency planning now appears to be a matter of the highest priority.

What you really need to know is what the biggest risk to your business is if, for any reason, cash begins to stop flowing into it but the demands for payments continue. In that case, what you need is a detailed understanding of what precisely you are spending money on.

You may well have little control over debtor payments in the months to come, but you can control what you are paying out. So, make sure you have detailed cashflow and a precise understanding of it: it is going to be vital.

Then ask some obvious questions. For example, is there capital expenditure that can be deferred now? If so, why not do so, immediately?

And what about other discretionary spends? For example, is advertising expenditure really going to be useful over the next few months? And are people going to attend conferences or training events? Can commitments to hospitality at least be postponed until more is known? To put it another way, can these things be deferred right now, however precious they might be to some members of the management team?

Perhaps, most importantly, how can the balance sheet be managed over the coming months? Is now the time to apply for a loan holiday? Are there options for deferring payments on leases? Have landlords been approached for deferred payment arrangements?

And even if these are not issues as yet, have you worked out which of these options is the most important to you, and have you begun to prepare the necessary paperwork to apply for each of these deferments? If you do this now there will be less stress when you need them. And remember to also include HMRC in this mix: they might be the most amenable of all organisations to a deferred payment arrangement.

I strongly recommend thinking about these issues now. Whilst for some accountants juggling in this way is a normal way of living, it is not for many, and getting used to sending begging letters asking for deferred payment periods may be something that takes a little getting used to.

Anticipation is the key to good management. Vast numbers of companies that have never thought about making late payments or defaulting on their bank or rent obligations, let alone paying their tax late, will be doing so very soon. Getting your head around that fact is something that you might need to do. Do it now and you might be providing your company with the greatest assistance possible during the difficult times that may be ahead when paying your people might be the highest priority that you have, and everything else will be secondary.

Planning now is the only wise thing to do if your company is to survive coronavirus.

Replies (22)

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By [email protected]
06th Mar 2020 09:55

The government has no contingency plans, yet the consequences of an epidemic should have been high up on their risk planning.
I am still waiting to hear the details of the new statutory sick pay arrangements, financial support for businesses, whether HMRC, Companies House and Charity Commissioners and other statutory bodies will allow extra time for filing without imposing late filing penalties. It is difficult to plan when the government is not taking the lead.

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Replying to [email protected]:
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By JSJ54
06th Mar 2020 10:10

All politicians fiddle while Rome burns.

Perhaps the accountancy bodies, or more likely accountingWEB, should ask the Government for answers to these questions.

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Replying to [email protected]:
By ireallyshouldknowthisbut
06th Mar 2020 15:37

SSP is paid by employers so that's really just government saying "business pays more". Zero cost to the exchequer.

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By Justin Bryant
06th Mar 2020 10:35

I thought it was obligatory for RM to mention nasty tax avoiders in all his posts. What's going on?

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Replying to Justin Bryant:
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By AndyC555
06th Mar 2020 10:53

Fear not. This article may read as if it's been written by a wise and friendly tax-Yoda (even if it is stating the bleedin' obvious) but over on his blog he's suggesting that because of the Coronavirus, all tenants should get a minimum statutory 3 month rent-free holiday and if this causes financial hardship to landlords (who are all evil rentiers (and probably nasty tax avoiders anyway)) then that's tough.

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Replying to AndyC555:
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By Justin Bryant
06th Mar 2020 17:31

Thank you for your reassurance that all is stable in the world again and that the balance of the universe as a whole has been restored to its natural, ordered state (I assume he cannot afford to step out of line for fear of losing his Marxist trade union paymaster funding).

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Replying to Justin Bryant:
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By AndyC555
07th Mar 2020 10:40

It seems that the reason that a minimum 3 month rent holiday is Ok is that according to Mr Murphy

"as a matter of fact (even if most were dispute it) landlords are wealthy. They have the means to ride out a short-term loss of income which the vast majority in the population do not have."

So if you think are a financially struggling landlord, rest assured, you aren't.

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JD Portrait
By John Downes
06th Mar 2020 11:17

"Then ask some obvious questions. For example, is there capital expenditure that can be deferred now? If so, why not do so, immediately?"

Those of us in the capital goods supply business will be grateful for this wisdom and insight.

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JD Portrait
By John Downes
06th Mar 2020 11:17

"Then ask some obvious questions. For example, is there capital expenditure that can be deferred now? If so, why not do so, immediately?"

Those of us in the capital goods supply business will be grateful for this wisdom and insight.

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Replying to John Downes:
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By timworstall
07th Mar 2020 08:19

Quite, Especially as business investment is the most variable of GDP components and is also the leading indicator - and cause - of a recession when it slumps. All that Keynes and animal spirits stuff.

Murphy is thus advocating exactly the action that will cause a recession. Well done.

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By shumph
06th Mar 2020 12:59

Is this person for real? I would hate to have his outlook on life!! Do we all just give up on everything and believe all the hype people like this like to wip up!!

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By SXGuy
06th Mar 2020 14:46

Most if not all of my clients are self employed so I can forsee pretty much all of them continuing to work to pay bills thus I do not see a knock on affect resulting in any issues for me.

Furthermore a lot of them are black cab drivers and I have been told there has been a big up take in their services since people are wanting to travel with a shield between them and the driver, so it's a win win all round.

Even if some of them decided to not visit me I can not see why I could work and get paid remotely so in all I don't see an issue.

Side note, it's all scaremongering propaganda anyway.

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By flightdeck
06th Mar 2020 15:14

Who can we sue when this bizarre (bizarre) over-reaction is seen for the emperors clothes it is? Just because you can watch Contagion (whatever, some stupid Hollywood movie) and hit the re-post button...Honestly, I thought we retained some intelligence. Clearly not. Instead businesses will go under, people will lose their livelihoods for something that is nothing worse than a once a decade flu bloom.

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By K81
06th Mar 2020 15:21

we currently have a member of staff in Greece, can we ask them to self-isolate on their return rather than come into the office, several members of staff are concerned.

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Replying to K81:
By ireallyshouldknowthisbut
06th Mar 2020 15:42

Does the bit of Greece they went to have a bad outbreak then? In which case, probably a sensible arrangement.

Or is it just an idly racist "they went to where foreigner's live?"

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Replying to ireallyshouldknowthisbut:
By K81
06th Mar 2020 15:47

they are in Rome, but also they have been & will be on an aeroplane with people from anywhere & also at an airport both in Greece & here in UK where there also many other people from all over the world. we have staff with heart problems & asthma who are becoming increasing concerned as the date for the other member of staffs return to work draws closer!
could our staff with underlying health problems reasonably ask to work from home in this situation?

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Replying to K81:
By ireallyshouldknowthisbut
06th Mar 2020 16:23

Id suggest your elderly staff all put down their Daily Mails, or they will have a heart attack worrying about it.

On a serious point id suggest if the old boys in your office are allowed to work from home now, when are you going to ask them back? When there are a thousand of cases a day in a couple of weeks time? Or of tens of thousands in a months time? If they are scared now, they are going to be white with fear and shaking by Easter.

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Replying to ireallyshouldknowthisbut:
By Ruddles
06th Mar 2020 16:34

Best thing to do with the Daily Mail - make an origami face mask.

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Teignmouth
By Paul Scholes
06th Mar 2020 16:57

In my opinion this will just be a practice for the threat we've known about for 40 years but have done little to prepare for https://www.theguardian.com/commentisfree/2020/mar/05/governments-corona...

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Replying to Gavin Fluidly:
Lone Wolf
By Lone_Wolf
10th Mar 2020 10:44

Shouldn't you have the decency to pay the site owners for advertising, rather than this lame attempt at joining the conversation to promote your product.

I wonder how this sort of marketing approach works as it just gives me the impression that those involved are leeches.

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