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Real Business Rescue's Keith Tully on COVID-19

Real Business Rescue is a restructuring and turnaround service for businesses in financial distress. We spoke to Real Business Rescue partner, Keith Tully. In addition to providing long-term support, Keith and his team are providing urgent consultancy services to businesses hit by COVID-19, including negotiating HMRC Time to Pay arrangements and raising emergency finance.

What can you do if trade doesn't pick up after lockdown?
If your furniture store or manufacturing business is feeling the brunt of the coronavirus pandemic and the associated economic decline, you may be biding your time until trade picks up again, hoping to regain financial health, boost cash flow and experience customer demand. As lockdown measures begin to ease and non-essential retailers in the UK reopen, businesses are playing catch up on orders and encouraging new trade, however, this cannot be done at 100 per cent capacity as social distancing measures remain in place, writes Keith Tully of Real Business Rescue. 

Furniture retailers are coping with a backlog of orders due to supply chain delays and staggered payments following the COVID-19 lockdown which continues to disrupt sectors including hospitality, tourism, health and leisure. As consumer demand has been pent up throughout the lockdown period, similar to the housing sector, demand is due to soar as home delivery services resume and products become available following a long pause during the coronavirus pandemic.  

Is the furniture sector regaining footing?
As the furniture sector begins to lift online purchase restrictions due to the development of socially distanced deliveries and furloughed staff members returning to work, trading conditions are showing some positive signs, but remain far from normal. In between a nervous customer base and providing a ‘COVID-19 secure’ environment for shoppers, your furniture business may be struggling to repair the financial damage caused by the pandemic. It’s vital to adapt to the current trading landscape and seek professional advice to ensure your business can operate efficiently if that is the case. 

Adapting to the COVID-19 Era
Many furniture retailers are finding new ways to adapt to trading in harsher conditions, such as opening up delivery options to offer click and collect, socially distanced home delivery services and operating on an appointment-only basis. Non-essential retailers in the UK can now open their doors, providing that they comply with COVID-19 secure guidelines. This consists of complying with social distancing measures at work, increasing the frequency of cleaning surfaces, minimising contact between colleagues and installing barriers between workplaces, such as customer consultation areas and payment stalls. 

If you’re unable to overcome the trading challenges of COVID-19, act early before jeopardising your relationship with suppliers due to late payment and trading wrongfully. 

Risk of Wrongful Trading  
If you’re aware that your business is unable to fulfil payments to suppliers and you continue to trade, you run the risk of wrongful trading. It’s worth noting that as a reaction to COVID-19, a temporary moratorium is in place for wrongful trading which means that company directors will not be held personally liable for trading with the knowledge that they are going out of business. If your balance sheet and cash flow test shows that you’re on the brink of collapsing, it’s time to rethink your strategy. 

Rescue and Restructuring 
If your business is experiencing financial strain and you require specialist advice to help it survive after the lockdown if trade fails to pick up, here are some rescue measures which may assist you: 

Time to Pay Arrangement – Following COVID-19, HMRC opened the doors to Time to Pay arrangements, making them more accessible. A Time to Pay arrangement is an agreement between HMRC and the end party to restructure VAT, PAYE and Corporation tax payments into affordable instalments. 

Business Funding – Commercial finance can offer the helping hand needed to unlock working capital and cash flow for your business to survive COVID-19 and the aftermath of the pandemic. This may include the likes of invoice finance, asset-based lending and loans. 

The government has also announced additional COVID-19 business support measures such as the VAT deferral, the coronavirus business interruption scheme and the coronavirus job retention scheme. 

Company Voluntary Arrangement – A Company Voluntary Arrangement (CVA) is a rescue route for struggling, yet viable businesses with real prospects of recovery. A CVA opens up the channel to renegotiate terms with creditors to reduce monthly outgoings, making them more affordable. 

Company Administration – If your business is insolvent, taking the administration route could help facilitate recovery. If you’re experiencing cash flow problems and creditor pressure, company administration can protect your business from legal action, such as liquidation. Company administration is suitable for businesses with significant asset worth or value. 

If your business is past the point of recovery, turning to closure options such as company liquidation may be the answer to facilitate an efficient exit, maximising value from inventory, stock and assets. 

This unprecedented and volatile period of trading as a result of the coronavirus pandemic continues to weaken businesses across the furniture industry; however, seeking early advice from a licensed insolvency practitioner can help avoid business deterioration. As furniture retailers and homeware stores adapt to new ways of operating and adjust to customer behaviour, the future looks less bleak and gives a peak into the ‘new normal’.
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