Following the introduction of COVID-19 containment measures across the world, real gross domestic product (GDP) in the OECD area fell by 1.8% in the first quarter of 2020, the largest drop since the 2.3% contraction in the first quarter of 2009 at the height of the financial crisis, according to provisional estimates.

Among the Major Seven, GDP dropped significantly in France and Italy, where lockdown measures were most stringent and implemented earliest (by minus 5.8% and minus 4.7% respectively, compared with minus 0.1% and minus 0.3%, in the previous quarter).

GDP also fell sharply in Canada, Germany and the United Kingdom (by minus 2.6%, minus 2.2% and minus 2.0% respectively, compared with 0.1%, minus 0.1% and 0.0% in the previous quarter‎).

In the United States, where many states introduced ‘stay-at-home’ measures in late March, the contraction in GDP was less dramatic (by minus 1.2%, compared with 0.5% in the previous quarter).

In Japan, where containment measures have been less stringent, GDP contracted by minus 0.9% in the first quarter of 2020, compared with minus 1.9% in the previous quarter.

In the euro area and in the European Union GDP shrank by minus 3.8% and minus 3.3% respectively, compared with growth of 0.1% and 0.2% in the previous quarter.

Year-on-year GDP growth for the OECD area fell to minus 0.8% in the first quarter of 2020, following growth of 1.6% in the previous quarter. Among the Major Seven economies, the United States recorded the highest annual growth (0.3%), while France recorded the sharpest annual fall (minus 5.4%).

As lockdown measures begin to ease – some businesses have started up again already, and others will follow suit over the next few weeks – Mark Neath, director at financial experts Old Mill says businesses owners need to start planning now for the impact on cash reserves and below has set out six key dates that businesses should be planning for over the next 12 months.

September 21, 2020

“For many businesses, the actual lockdown itself will not be the worst period for cash flow, instead it will be when things start up again. As the working capital cycle begins, there will be certain commitments, and the reserves you would normally rely on have already been depleted.

“If we assume that most businesses are going to get back to some sort of ‘normal’ in June or July, the peak effect of the working capital rebuild is probably going to hit in September. And therefore, the last week of September is a key date that businesses should start planning for now.”

October 1, 2020, / January 1, 2021

“As most UK companies have December or March year-ends, 1 October this year and 1 January next year are key dates as they are when Corporation Tax payments are due.

“The crisis hadn’t kicked in back in December and was only just taking hold in March, so profits were probably higher then, and the tax bill most likely larger. Since then, the lockdown may have depleted the cash generated in your last financial year meaning it is no longer there to pay the tax.

For December year-ends, who have just gone through the September working capital peak, cash could be particularly tight.”

Mark says that as these dates are either three or six months away, there is time to plan and manage cash if possible, which may involve agreeing a Time To Pay arrangement with HMRC to spread it over a number of months.

November 7, 2020

For businesses with a March/June/September/December VAT stagger, which is the most common, 7 November is the due date for the VAT on the September quarter.

“The September quarter is likely to be the first quarter with a significant liability from returning to normal trading,” warns Mark. “Bearing in mind that this payment is going to be following hot on the heels of the September working capital peak and potentially the October Corporation Tax payment, the VAT payment will need to be planned for.”

Mark says that whilst it may be possible to spread the payment with a Time To Pay arrangement with HMRC, or short-term borrowing, these tactics are potentially dangerous to enter into.

“If there’s one thing that I’ve seen push businesses into insolvency more than any other, it’s getting behind on their VAT. This is because paying off last quarter’s VAT using this quarter’s cash flow is using up the cash needed when the VAT on those sales comes due. If necessary, transfer the VAT element of your customer receipts into a separate account so it’s there when you need it.”

January 31, 2021

The end of January is the payment date for income tax. And while this is a personal liability, not a company one, for many owner-managers, all income comes from the business, so there is usually a knock-on effect.

“Since the government made it possible to defer the 31 July 2020 payment on account, the amount that will be due on 31 January 2021 will potentially be that much higher. In an ideal world, we would all put our 31 July 2020 payment into a separate bank account so we have it ready, but if you have reduced your drawings to protect the company, that may not have been possible so you may need to draw money from the company to pay the tax, causing more issues with cash flow.”

Mark says that while you could potentially agree a Time To Pay arrangement with HMRC, that is spreading not reducing.

“The January 2021 payment will be based on your income to 5 April 2020, which was pre-crisis and may well be higher than your income for the tax year 5 April 2021. It may, therefore, be possible to reduce the payment on account that needs to be made on 31 January alongside the 2019/20 final payment. Also, get your tax return done as soon as possible so that you know what the amount is.”

March 31, 2021

One of the first things the Chancellor announced was that no VAT that was due during lockdown needed to be paid until the 31 March 2021, so this is a significant date, and, given the various drains on businesses’ cash flow that have already had a significant impact, has the potential to be one of the most critical dates in the COVID-19 crisis, as Mark explains: “I fear there’s a risk that more businesses could be pushed into insolvency on March 31 than during the actual lockdown. This statement may seem a little negative but it’s essential to confront the realities of the situation now and as it’s more than nine months away, you have time to plan, put money aside or arrange facilities to fund it. The worst thing you can do, as a business owner, is to put your head in the sand and ignore this potential issue that’s coming towards you.”

Other dates to keep in mind are rent quarter days; traditionally in the UK, quarterly rent is payable on 25 March, 24 June, 29 September and 25 December.

“If your business pays rent quarterly, then three of these quarter days closely coincide with the key dates we have identified at the end of September 2020, December 2020 and March 2021,” says Mark. “If your forecasts indicate that these dates could be a problem for your business, now might be the time to start negotiating with your landlord to switch to monthly rentals to smooth the cash flow effect.”

May 1, 2021

The final date to be aware of is the year anniversary of the CBILS (Coronavirus Business Interruption Loan Scheme) and BBLS (Bounce Back Loan Scheme). These started to be advanced in April and May 2020, mostly with twelve-month repayment holidays, so most repayments will start around May 1.

Mark said “The CBILS loans were assessed for affordability, often assuming a return to 2019 trading levels by the time the loan payments commence while the BBLS loans were issued with no checks on affordability at all. “Due to the significant impact on the economy, it’s quite likely that 2019 sales levels will not return, and that, combined with the aforementioned pressure on cash flow, many businesses could find themselves unable to repay their loan and I fear this could result in a second wave of business failures over the course of summer.”

Mark concludes: “I may sound alarmist, and while the situation is not ideal, those businesses that are prepared to confront the brutal facts of their current reality will be the ones that prevail. The dates above are key; highlight them in your calendars now and start thinking about how you might navigate through a series of ‘pinch points’ from a cash flow perspective.

“The key to business resilience will be to address these challenges head-on and it all starts with planning.”

Money laundering is a big issue in the business world and accounts for two to five per cent of global GDP, with nearly £1.6 trillion illegally laundered worldwide last year.

As a business owner or leader, a key responsibility is to ensure the organisation remains compliant with the various regulations to protect the company and its various stakeholders. To make this process more straightforward, anti-money laundering service, SmartSearch, has identified five tell-tale signs of suspicious activity to help businesses prevent any foul play.

1. A lack of detailed information

A company that lacks detailed information about certain aspects of the business, particularly monetary transactions such as exact amounts of investments or payments to external parties, is a cause for concern.

This is more common in businesses operating with a lot of cash transactions, such as a cardless fast food takeaway, where additional money can be added in to boost turnover without being detected. To ensure there is nothing untoward, detailed accounts of all cash flow, including receipts, should be readily available and the same applies to payments to suppliers and staff.

2. Unusual or unplanned transactions

Instances where a business suddenly engages in movements of money or assets, which don’t appear to add up, is worth investigating. If there have been any unplanned transactions on your business’ books, such as selling an asset for below market value or moving resources without a proper announcement or details of where it is going, this could be a sign of illegitimate activity. Also, if there is evidence of high frequency, high value and rapid movements of money and resources, this should be looked into further.

3. A change in behaviour

If there have been any sudden changes in the behaviour of clients or colleagues in relation to the movement of funds, you should do some digging. Quite often, in a case of money being laundered, transactions will be put through business accounts extremely quickly, likely bypassing all the usual operating procedures, and if this is the case, it should be flagged straight away.

This is very much the same in terms of clients’ behaviour or other external stakeholders as well. If they suddenly change their approach to how they want investments or transactions to be managed, without due diligence as previously agreed, this is worth investigating further.

4. Overly complex business structures

Complicated and illogical business ownership or leadership structures are common where money laundering is concerned, as this is an effective way of disguising the true ownership of money and assets. If there is no obvious explanation to why the company is structured in such a way, this should set alarm bells ringing.

In many cases of money laundering, businesses choose to use investors or shareholders overseas and so any activity with firms with no obvious geographical connection should also be scrutinised.

5. Working with high risk individuals

Exactly who your business gets involved with can be a sign of something untoward. In an instance where a company starts working with politically exposed individuals in a position of power, further investigation is certainly needed.

A Politically Exposed Person (PEP), who could be a current or former senior official of a government structure, is able to abuse their position in order to commit money laundering and so their activity should be monitored carefully, with any negative press about them taken into account before any business relationship is forged. Similarly, if a firm suddenly becomes involved in monetary activity in high risk, unstable countries, this is also something to keep an eye on.

John Dobson, CEO at SmartSearch, comments: “It is clear that money laundering is an increasingly prominent issue, and so the risks to businesses falling foul of illegal activity are now greater than ever.

“With the regulations becoming more strict all the time to try and crack down on this escalating problem, and the huge sanctions placed upon companies found guilty of money laundering, it is extremely important to be able to spot early warning signs of anything unusual. Exercising due diligence and flagging any concerns you may have will help you tackle any issues and protect your business, ensuring it remains well trusted and profitable long-term.”

To find out more, please visit: https://www.smartsearch.com/

As we adjust to our new normal, business owners are immerging with a new sense of determination. Entrepreneurial spirit is flourishing, and resilient businesses are acclimatising to uncertainty. It’s time to focus on what you can control, not what you can’t.

Consistency is key, but so is the customer

Regardless of your delivery method, service or product, ensuring a consistent sales methodology is essential. This applies even if you’ve had to temporarily close your operation. Focusing efforts on streamlining and perfecting your sales process during this time can help to futureproof your business. At the very heart of this sales methodology should be customer need.

A quick and significant reduction in your sales figures at the beginning of the crisis is pretty much certain for most sectors, so it’s best to address what is happening honestly and as practically as possible. This builds trust with customers.

Approaching this situation in the right way can lead to improved relationships in the long run. Importantly, consider where you can add value in a viable way to customers amidst economic challenges.

For some this may be offering light relief, advice or entertainment to your community across social media, for others it may mean adapting your service offering to meet your client’s new needs. No matter the approach, ensure your sales methodology remains consistent in considering the real needs of your customers at any given time.

The impact of Coronavirus on the buying cycle

The latest research suggests that now, on average, there are 6.8 people involved in a buying decision. At times of crisis, it is more than likely you will see the decision-making unit expand even further, as your customers seek approval from the top C-level executives.

Just as you may be feeling nervous in the current climate, your customers will be hesitant to make deals too. We know customer needs and priorities are changing rapidly and it’s essential they see you, their supplier as someone they can trust. The negotiations will likely require extra time and attention and should be used as an opportunity to nurture your relationships. It’s important that people who are worried about their business outlook have an opportunity to share those worries in a structured way with somebody who can be – genuinely, not cynically – a trusted adviser.

The buying cycle will still follow the same processes as usual; changes over time, recognition of needs, evaluation of options and resolution of concerns, however some parts of the cycle may require more time and consideration than usual.

Skilled sellers would avoid jumping in with any ready-made or quickly concocted answers during the changes over time section. Instead, they’ll try to understand, as forensically and unemotionally as possible, how customers see the business and personal dislocation affecting different aspects of their operations, and the same skilled sellers will consider (without necessarily yet talking about) whether any needs start to emerge that they could meet – possibly in innovative ways.

During the recognition of needs part of the cycle, a skilled seller will focus questions on those impacts, all the time thinking about, but not yet describing, what the right solution could look like and how they could provide it. People who talk and ask about the future state (whatever it may hold), are often the most persuasive. They don’t dwell on how we got here, or even the harm is has done, but instead on how to mitigate that harm and what positive steps might have to be taken to confront the challenge.

Once the buyer reaches the evaluation of options stage, they’ll be asking themselves, “how can this supplier and their solution, more than anyone else I can see in the landscape, help us to mitigate and improve our situation?”. Anything that customers spend money on in abnormal times also has to meet needs in normal, business-as-usual times. But they’ll be more focussed on moving solutions that will get them through the present crisis up their corporate spending agenda – and they’ll be wondering if the solution they are currently evaluating really does that.

At the moment, customers might perhaps be bringing thoughts that normally crop up in resolution of concerns forward into their evaluation stage. More than ever, it’s about risk. If the seller can genuinely, by revisiting (in consultative, not declamatory, ways) the original benefits and guidelines that made the case persuasive and the supplier credible in the first place, that will help. So will re-treading with the customer again how the solution in question mitigates rather than enhances risk – and perhaps show how and where other customers are already finding this to be the case. What the research tells us without doubt is that minimising and making light of buyer’s concerns, prescribing a solution in defiance of the consultative conversations that have gone before, or pressuring the customer at what ought to be the final stages of the sale, are the highway to failure. Now, more than ever, buyers will be anxious about the consequences of their actions. Sellers need to uncover, clarify and help resolve these anxieties in full co-operation with the buyer.

The nuances of remote selling

Whilst employees are used to spending the majority of their time on their phones, computers or other technology, getting used to closing business deals over conference call and skype meetings can be a challenging prospect.

When developing your sales call plan, it’s important that you are strategic in your approach. You should consider who you contact and when, how likely you are to get a hold of someone and how likely they are to take your call and enable access to decision makers. This will increase your chances of success, creating a higher conversion rate and ensuring you invest your time and energy in the right areas.

When making calls, always have an objective in place. What do you want from your chosen contact? Is it to make a sale, or is it to get the contacts details for another decision maker, or even to try and arrange an appointment with their colleague? A good idea here is to work out both a primary and secondary objective for your call to give you more of a sense of achievement as you will not have to rely on pressing for just one outcome.

And when conversing with your contact, consider your credibility statement. Whether this is your ‘value proposition’, ‘hook’ or ‘elevator pitch’, it often makes up the basis for why your prospect will answer your call. Your credibility statement should include a solid business reason for your call, stating how your product or solution will add value, by either solving a problem, meeting a need, being relevant to the prospect and their role, being linked to your sales objective or being linked where possible to previous contacts or conversations.

By Tony Hughes, CEO at Huthwaite International, a leading global provider of sales, negotiation and communication skills development.