Now that the majority of COVID-19 restrictions are being eased, or removed completely, can we assume that normality can return in place of the unremitting uncertainty of the past two years?

Whilst this may seem to be a welcome prospect, business owners badly affected by this disruption will have two issues holding them back:

• A depleted balance sheet – reserves used to survive extended periods of shut-down or reduced trading.
• The repayment of loans taken out to fund overheads and other fixed costs during lockdown.

Both of these issues will inhibit a sudden rush of activity unless sales are made on a cash basis.

To minimise any downside risks we recommend pausing to create a realistic business plan for at least the next twelve months. This will identify any dips in cash resources and reveal the level of profitability that can be achieved.

Please, pick up the phone if you would like to discuss the best way to build a plan for your business.

HMRC recently published a reminder targeted at married couples with an unused personal tax allowance. They said:

Marriage Allowance allows married couples or those in civil partnerships to share their personal tax allowances if one partner earns an income under their Personal Allowance threshold of £12,570, and the other is a basic rate taxpayer.

Eligible couples can transfer 10% of their tax-free allowance to their partner, which is £1,260 in the 2021-22 tax year. It means couples can reduce the tax they pay by up to £252 a year. Couples can apply any time, backdate their claims for any of the 4 previous tax years and receive a payment of up to £1,220 at a time when they need it most.

Married couples may have experienced a change in their circumstances which could now mean they are eligible for Marriage Allowance, including:

• a recent marriage or civil partnership
• one partner has retired and the other remains working
• a change in employment due to COVID-19
• a reduction in working hours which means their earnings fall below their Personal Allowance
• unpaid leave or a career break, or
• one partner is studying or in education and not earning above their Personal Allowance

If a spouse or civil partner has died since 5 April 2017, the surviving person can still claim by contacting the Income Tax helpline.

Marriage Allowance claims are automatically renewed every year.

More challenges to our financial plans last week as the Russian incursion into Ukraine has boosted the price of oil and gas and adds a new layer of uncertainty to global economic activity in the coming year.

How will this affect our current business plans?

There is a tendency to see a business plan as fixed in stone; something that you have to aspire to come what may. Of course, this is completely unrealistic. Consider, for example, the plight of business owners in the entertainment and hospitality sectors during the past two years.

What business owners may benefit from is a flexible budgeting approach.

Why flexible budgets?

To be of use to your business, plans need to be flexible. And there are sound commercial reasons for this approach. For example, by reconsidering your plans as external challenges arise, you may decrease or perhaps eliminate the down-side risks to:

• Cashflow
• Overhead cost increases
• Sales volume
• Sales price sensitivity
• Staffing issues
• Investment decisions
• Tax planning
• Solvency
• Business exit plans

Part of monthly management accounts review process

Experience of the past two years, more recent challenges to global trade, rising inflation and forthcoming company tax increases all point to the need to adopt a more dynamic approach to monitoring our financial plans.

We now recommend consideration of a walk-through review of critical aspects of your business plans on a monthly or quarterly basis to ensure that remedial changes can be made before any effects on cashflow, profitability or solvency become critical.

It may well be that this short review will endorse a ‘steady as you go’ approach. But this is not wasted effort. As recent disruption has revealed, setting aside time to consider the wider context of challenges to your business plans will catch those downside risks before they become terminal events.

Please call if you would like to discuss the adoption of this strategy for your business.