COVID-19 Financial Survival
These are extraordinary times – we don’t know how long this crisis will last. Most of us have limited savings, and reductions in income mean we must tighten our belts. The earlier we deal with the new reality, the sooner we will be ready to recover from it.
Feedback from health services in Ireland and Europe is telling us that this virus is going to put a huge strain on our health services. The HSE is not capable of handling a level of infection similar to that of Italy, Spain or the USA which is why you hear talk about “flattening the curve”. Let us explain:
In order to prevent the collapse of the health service, and the unnecessary death of many thousands of people due to lack of capacity, both of beds and respirators, they are trying to limit the amount of people infected at any one time. This means that they know that most of us will eventually be infected, but are hoping that we will have either a vaccine or bed and respirator capacity by the time it happens (assuming we are higher risk). This means that this is going to be a longer-term issue than the 4 weeks we are hearing. It is likely that this is more to be a 3-6 month situation, unless there is an earlier vaccine.
China is re-opening its doors to business, but in a very different way to before. If there was a vaccine, this would not be for some time. So, in our opinion, we should be planning for 6 months of financial shock. Schools may re-open in some format – online or exam classes only, but travel restrictions could remain for some time.
This is probably the biggest challenge to us since the Spanish Flu in 1918-19, which had a similar effect. We are finding positives in this crisis, though, as most people seem to have developed a fighting community spirit, are more willing to help others, and giving their support to those in the front lines in this crisis – the healthcare workers, the retailers and the logistics people.
What it does mean, however, is that there are a lot of us who have been affected. We have been sent home, either to work or laid off, we have been forced to tell our staff to go home, sometimes without pay, and we are worried about our finances. Here, doing our bit for the embattled at home, is a summary of what you should be thinking in relation to your finances during this time.
Review Your Financial Situation
Everybody should review their savings and borrowings, their assets and liabilities, any monies due in – you may be over 50 and be able to draw from an old work pension/Insurance payout, or should you hoard your cash or pay off borrowings?
Insurance Matters
Yes, you can still get Life Insurance and Income Protection Insurance, as long as you are not diagnosed with COVID, or have been in a high risk country in the last few weeks. There are no exclusions, and you can apply online or via telephone with us so please get on to us if you need to get something in place.
We have split the different circumstances into categories – pick the section that fits your case:
Small Businesses (with staff):
Should you start setting things up for the return to some sort of normality? Should you approach your bank or other lenders/local enterprise office for funding? It might be a good time to make those changes or to boost working capital and have facilities ready to be drawn when the time comes. Be ready!
Business Continuity
There are very few small businesses unaffected by the crisis. Those that are still open are worried about the safety of their staff, the likelihood that business will continue, and also the ability of customers to pay their bills.
Business continuity – Is your business classed as Essential under the current Government lockdown? Can you be happy that you and your staff can work with the current Social Distancing rules? Are you able to provide the necessary health and safety necessities?
If yes, will there be an effect on turnover due to lower purchases/consumption due to the current crisis? If no, you need to look at what level of business you can sustain in the current climate – either operating with a reduced presence, or do you close your doors entirely?
Assuming that you are unable to continue to keep your staff safe, or that you have to reduce your offering to your customers, or even close your doors, what happens next?
Business Overheads
Staff – normally your largest overhead. Can they work from home? Are you content to help them set up from home? How much or the workload can take place from home, and how much will need to be done from premises?
Assuming turnover means that you cannot cover full staff wages, do you consider the Revenue Covid Refund Scheme or do you look at layoffs? If you have the working capital sufficient to cover wages until the Revenue scheme is up and running, this would be the ideal option for your essential staff – Revenue will refund you for up to €410 per week of what you pay your staff that have been sent home without work.
You may choose to lay staff off during this period, either due to lack or working capital or as you are unsure if they will be required when your business starts up again (possibly due to reduced turnover in the ensuing economic climate), then you need to provide them with the emergency COVID19 welfare application asap. You should encourage those who can to apply online as this would work more quickly.
- Other Overheads – these can be large and must be addressed urgently.
- Rent/Mortgage for premises – talk to your landlord or bank. They will be expecting your call and are unlikely to refuse to engage with you. You may be offered a short-term break or reduced payment, or have to make up any arrears over time.
- Rates/Revenue – There are schemes in place to allow for holidays on payments. If you have a direct debit or standing order in place, you might want to cancel or suspend it until you have clarity.
- Utilities – Check on the websites of those suppliers – most have procedures in place for reduced payments or holidays.
- Business loans or car/van finance – talk to your bank or finance company – they are expecting your call.
- Pension Scheme/Insurance – You have to check the rules. In relation to Pensions for staff, you may have an obligation to continue to pay these if they are still on payroll. Your own Pension is under your control. Insurance is also tricky – your Insurer may have set up a system to take a payment break. Talk to your insurer or talk to your broker. Please note we are saving companies for their Death in Service cover for their staff.
- Do you have Co-Shareholder or Key Man Insurance? What happens if one of your top people (or you) dies or is Seriously Ill? Do you have a contingency plan in place to make sure there is enough cash in place to keep the business running? Talk to us!
- Take a break to clear your head – go for a walk or run.
- Clients and Customers: These people are your livelihood
- Talk to your clients or customers – let them know if you are open for business. Update your Facebook page or website.
- Ask them if they have any need for your services – now or in the near future. This could give you a chance to fill your diary for now or for when things return to some form of normality.
- Ask them if you can do something for them. One positive from this crisis is that people are more interested in talking, and more caring about other people.
- Do that little bit extra.
Future Planning
When you have gone through the above, you should take the time to sit back, take an objective look at your business, and make some plans. Since you have been too busy short-term to think, are you happy with the way things are going? Is there something you are missing? If so, how do you achieve it?
We are keeping a close eye on supports from the government for small and medium-sized businesses. Aside from Revenue deferral, there are some loans available through Microfinance Ireland and other sources, but grants are limited to those for mentors and professional advice. Beware anybody offering grants that sound too good to be true.
