Are you ready for the end of the furlough scheme?
The Coronavirus Job Retention Scheme (or the ‘furlough scheme’ as we’ve all come to know it) comes to an end shortly – a loss which could have a significant impact for your business.
The furlough scheme has been a cashflow lifeline for many businesses over the course of the pandemic. Having this government funding to allow you to cover 80% (now 60%) of your furloughed staff’s wages has made a huge difference in these unpredictable times.
But what happens now once this route to government financial support is removed? And what will the impact be for your business?
When will furlough payments finally stop?
- The furlough scheme ends officially on 30 September 2021, having been extended several times over the course of the preceding year
- Furlough claims for September must be submitted by 14 October 2021 and any amendments must be made by 28 October 2021.
- Time is rapidly running out to make use of the scheme.
How can I prepare for the end of furlough?
We are seeing the first green shoots of economic recovery at present. But recovery is still uneven and many businesses are still in a precarious position when it comes to stabilising recovery, managing cashflow and getting the business back on track to growth.
So, having to foot the entire payroll bill, even for staff who may still be unable to work due to Covid safety concerns, is likely to be a shock to your cashflow. However, there are elements of planning that you can get in place to mitigate the impact.
- Run forecasts of the financial impact – you will know the current average level of government furlough funding you’re receiving through the scheme. Factor this loss into your cashflow forecasting and review the short, medium and long-term impacts of this reduction in income.
- Review your cash position – how much cash do you have in the bank? And how are your cashflow and debtors positions looking at present? Look at the underlying liquidity of the business, review your cashflow runway and assess if you have the cash needed to operate over the coming months.
- Make decisions around staffing and redundancies – if your cash position is looking poor, and your staffing levels are looking over-resourced, you may have to make the extremely difficult decision of making redundancies. Losing key talent should be a last resort, but can be a way to reduce payroll expenditure and keep the business afloat.
- Look at routes to third-party funding – when the working capital and cash reserves are just not there to maintain a full workforce, you may want to think about bringing in extra finance. Borrowing money will provide a valuable cash injection, as long as lenders are convinced of the viability and creditworthiness of the business.
- Alternative routes to funding – the Recovery Loan Scheme is available until December 2021 as long as you’re a UK limited company, can prove you’ve been affected by Covid and have a viable business plan. And the R&D Tax Credit scheme can help to fund the staffing of any research & development (R&D) work you’re involved in, by cutting your corporation tax bill.
Talk to us about planning for the next step in your recovery
With furlough payments now gone, it’s vital to reassess your goals, strategy and funding as a business. As your trusted adviser, we’ll help you to run the relevant forecasts, review your cash position and come up with a post-furlough strategy for success.
Get in touch to talk about your recovery plan.