From furloughs to financing: essential business advice to cope with coronavirus

Campaign's guide to getting support for your business as virus reality bites.

Coronavirus: the government has a number of initiatives that could help (Getty Images)
Coronavirus: the government has a number of initiatives that could help (Getty Images)

Virtually every UK company in the advertising and media sector is facing a dramatic economic downturn and slump in cashflow, so a combination of self-help and government support is vital to weather the storm.

Businesses are already under huge pressure as work dries up, projects are postponed and clients cut fees or ask for "payment breaks".

Thousands of companies are furloughing employees – in effect putting them on leave as the government pays 80% of their salary, up to £2,500 a month – and seeking additional bank finance.

Chancellor Rishi Sunak's £350bn package of financial support includes an interest-free Business Interruption Loan Scheme for small and medium-sized enterprises and a separate finance option for bigger businesses.

There are many ways that brands, agencies and media owners can help themselves, as we explain in this guide.

Move employees to part-time hours or furlough  

Rather than let the Covid-19 crisis cause millions of redundancies, the government’s Job Retention Scheme is designed to help employers keep their staff in jobs, ready for when the economy picks up and people can return to work.

Under the scheme, employees put on furlough are still paid by their employer, which is then eligible to claim 80% of their salary, capped at £2,500 per month, from HM Revenue & Customs. The sum is subject to tax and national insurance.

The scheme will continue to the end of May, but may be extended if necessary. It applies to all employees who were employed on 28 February 2020 or before and includes those on full-time, part-time, fixed-term, casual or zero-hours contracts.

The main condition is that employees cannot work while furloughed, but could spend their time volunteering for the NHS, a charity or another organisation set up to help in the crisis.

Another option may be to ask employees if they would like to temporarily move to part-time working hours during the crisis. Employers should remember that employees are still protected by employment and contractual rights.

Senior managers at a number of companies are taking voluntary pay cuts of 20% or more.

Speak to your clients

"Not all of your client base will be affected in the same way," Esther Carder, partner at accountancy group Moore Kingston Smith points out. For example, she says, agencies acting for supermarkets may find them receptive to early payment of invoices.

Carder advises getting an early handle on what work will continue to come in to enable agencies to plan how they will deliver it while staff work from home – and possibly while a proportion are ill.

"Managing clients’ expectations during this time needs better-than-ever communication and client management," Carder says.

"If some of your clients are in real trouble, you should consider asking them to pay your outstanding invoices before undertaking further work for them, especially if that work is going to require bought-in costs. For other clients in a stronger financial position, you may be able to agree upfront payment for work."

Chase outstanding payments

Ask customers to pay the outstanding invoices they already owe, Keith Tully, partner at Real Business Rescue (the free specialist advice centre set up by Begbies Traynor to help businesses navigate the Covid-19 crisis), says.

Morrisons has led the way with this, paying 3,000 suppliers instantly, regardless of payment period. "Small businesses or the self-employed should use this moment to chase for instant payment," Tully says.

And Carder points out that some blue-chip clients have early payment schemes for accelerated payments and says these are still worth investigating, even though they may come with a charge or the requirement to offer a discount. It’s important to ensure that invoicing is still happening as quickly as possible.

"Have you got a plan in place in case your normal billing process is interrupted by illness? The key to getting the money in is getting the invoices out, with the correct purchase order details," she says.

"Another issue you could face is that clients may not be on top of their invoice approval processes while working from home, but their accounts payable team should be able to flag any issues.

"They should work with your account managers and your client contacts to ensure that all approvals are in place so that you are getting paid promptly."

Communicate with suppliers

Proactively speaking to suppliers to negotiate extended credit terms, instead of hiding from them, is recommended by Carder.

Key suppliers, especially, may be willing to grant longer terms to pay their invoices. All suppliers would rather you agree a payment date with them rather than simply defaulting on your obligations.

As many agencies are in a similar position, those who communicate best with their suppliers may end up receiving the most flexibility, according to Carder.

"If you are suffering from delayed payments from your clients, you might also want to explain that to your suppliers and agree you will pay them when you have received your outstanding payments," she says.

Request a rent payment break

"Ask your landlord for some breathing space if you’re experiencing a drop in trade which is impacting your ability to pay the rent," Tully advises.

He believes landlords might take a generous approach, due to these extenuating circumstances, by providing rent breaks or payment discounts.

The government has provided protection for commercial tenants who cannot pay their rent because of Covid-19, meaning that no businesses will automatically forfeit their lease or be forced out of their premises if they miss a payment up to 30 June.

However, the government is at pains to point out that this is not a rent payment holiday and companies that can still pay their rent remain liable for it.

Moore Kingston Smith  reports that some of its clients have been successful in agreeing a rent reduction for the period during which they are unable to use their premises.

And, while the current government support on business rates doesn’t extend to adland and the media industry, some Moore Kingston Smith clients have also had success with agreeing a rates holiday for the next couple of months and instead will settle those months at the back end of the fiscal year.

Access government-backed loans for SMEs

Open to SMEs with a turnover of less than £45m, the government’s Coronavirus Business Interruption Loan Scheme is access to interest-free loan, overdrafts, invoice finance and asset finance of up to £5m to help businesses through Covid-19-related difficulties.

Businesses will need to prove that they had been trading successfully but now need extra support to deal with short-term difficulties caused by current disruptions.

The initiative, with loans provided by more than 40 lenders including Barclays, HSBC, Lloyds and NatWest, will initially run for six months, offering borrowing terms of six years.

The government will provide a grant payment to cover interest and initial fees for 12 months and will guarantee 80% of the loan. The British Business Bank, operating the scheme, started offering loans on 23 March. It is also open to self-employed, sole traders, freelancers and limited partnerships. Applicants are encouraged to approach their own bank in the first instance.

Find finance for large firms

Offered by the Bank of England for companies with turnover of more than £45m, the Covid Corporate Finance Facility is a cash-flow scheme to boost the short-term funds of companies that are in sound financial health and have a very high credit rating.

It is a facility for the government to promise to buy IOUs that can be for a period from a week to one year.  

Defer VAT payments

HMRC is providing an option for businesses to defer VAT payments for three months. All UK VAT-registered businesses with payments due between 20 March and 30 June have the option to defer payments to a later date.

Get time to pay

For companies struggling to pay corporation tax, VAT and PAYE on time, HMRC has already announced it will waive late payment penalties and interest for missed payments, but it is also offering Time to Pay – a scheme that allows businesses to arrange to officially defer tax payments while times are tough.

A TTP arrangement allows for debt to HMRC to be paid back in monthly instalments, typically over a period of up to 12 months. Although depending on business circumstances and affordability, it says some arrangements can be agreed over longer periods.

Streamline needs

This is the time to examine business outgoings such as memberships or extra space that is going unused, Tully says, and he advises that reorganisation and a slimming down of costs will help when the economy picks up and business starts to move forward.

Check commercial insurance

Unfortunately, as acknowledged by the government, most commercial insurance policies are unlikely to cover pandemics or unspecified notifiable diseases.

However, businesses whose insurance policies cover "government-ordered closure and pandemics" or "government-ordered closure and unspecified notifiable disease" may be able to make a claim, subject to their policy.

Some business may also have their own business interruption cover in their insurance policies. However, they would need to check for an extension for "notifiable diseases".

On 5 March, the government added Covid-19 to its list of notifiable diseases.

Where to go for further help and information

London Growth Hub: is an advice centre and portal of Covid-19 support resources brought together by the London Assembly for London-based businesses.

Moore Kingston Smith's advice hub helps businesses maintain continuity during the Covid-19 crisis and beyond.

Real Business Rescue, a helpline for businesses in distress, was set up by Begbies Traynor in response to the current crisis.

Listentotaxman.com is for employers and furloughed employees wanting to model earnings and deductions.

Advertising Association website has advice for companies in the advertising sector.