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The End Of Furlough – What’s Next?

What does the end of the furlough scheme mean for your business? And how can you make sure you keep your business’s cash flow healthy as you’re forced to make tough decisions about your employees? If you’re wondering what’s next for your business, read on to find out the best way to prepare for life after furlough.

The coronavirus pandemic sent shockwaves across the world, and the UK government has responded by offering a number of schemes designed to support businesses struggling with cash flow problems and to bolster the economy.

Since the start of the pandemic, support has included loans such as the Coronavirus Business Interruption Loan Scheme (CBILS), the Bounce Back Loan Scheme (BBLS) and the Coronavirus Job Retention Scheme – also known as the furlough scheme.

At this complex time, many businesses have turned to cash flow forecasting to help navigate their way through the pandemic. In this article, we’ll explain how you can use cash flow forecasting to prepare your business.

What is the furlough scheme?

The Coronavirus Job Retention Scheme saw businesses across the UK putting their employees on furlough, where 80% of their wages were covered by the government. It’s estimated over 1 million businesses and 9.3 million employees benefitted through the scheme which was designed to support them throughout the coronavirus pandemic and its accompanying lockdown measures. Through the scheme, businesses were able to claim up to 80% of their employees’ wages, plus National Insurance and pension contributions, from the government. This meant businesses could keep employees on the payroll and avoid mass redundancies. Under the scheme employment law remained unchanged.

The scheme started in late March 2020, and in June 2020 the UK Government set out a timeline for the winding down of the furlough scheme. A flexible extension was introduced to the furlough scheme, known as the Flexible Furlough Scheme (FFS). From 1st July 2020 and the new scheme aimed to further support businesses severely affected by coronavirus during a recovery period. On flexible furlough employees could work a proportion of their usual hours and put on furlough for any hours they didn’t work.

The UK government originally announced the furlough scheme would end in late October 2020. However, after several extensions, the final end date for the scheme was given as September 2021.

What does the end of furlough mean for my business?

The Office for National Statistics estimated that on 30th September 2021, one million employees were still on the furlough scheme – with many of these in the travel and tourism industry.

If you’ve had your staff on furlough, you may be feeling understandably concerned about reopening and confused about the best way to bring employees back whilst balancing the books. It’s a delicate balance to strike, and having a good handle on your cash flow will empower you to move into this new phase with confidence.

Bringing staff back from furlough can pose a number of challenges. Some employees might not want to return due to childcare issues or health concerns, whilst others might prefer to return with only part-time hours. On the flip side, you may feel like your business no longer requires certain roles to be filled and it could be time to start considering making redundancies.

Sharon Brown from Magic Beans highlighted the concerns many of her clients are experiencing: “the main impact that I can see is that clients are looking at more ‘what if’ scenarios and they want to know exactly what their employment costs will be over the next few months. What if staff don’t come back until later? What if staff come back part-time? What if all staff come back and then sales are low? When will we run out of cash?”.

The guaranteed income from furlough payments ending means you will also have to plan for worst-case scenarios such as poor sales, low income and running out of cash.

“The end of furlough payouts will impact all businesses,” Emma Fox from Fresh Financials added. “I think most (redundancy) conversations will be happening when they can see how sales are performing and the impact on cash flow.”

Scenario planning for life after furlough

The key to adapting to the end of furlough payments is to plan ahead. Businesses that will emerge from this crisis and thrive are those that have a clear view of their cash runway and use cash flow forecasting to guide their decision-making.

Using Float’s scenario planning feature you can prepare for a number of different potential scenarios and see how various decisions could impact your business.

GIF showing moving cash flow graph

Accountant Lauren Harvey told us about one of her creative agency clients who is using scenario planning to create a plan of action to get their business back on track. “At the moment they are sat on a lot of cash, and we want to make sure they can see what it’s going to look like once these projects are spent,” Lauren said. The accountant is also encouraging all her clients to use Float to keep track of their VAT, tax and PAYE liabilities, particularly those who have deferred such payments.

At the best of times, scenario planning is a good way to stress-test the finances of your business. But at the moment, it’s an indispensable tool to help you preempt any pitfalls the decreasing support and the end of furlough payments could bring. Scenario planning can help you make tough decisions with a clear head to keep your business afloat.

As well as staff costs, your scenarios can also take into account changes in income and cash injections from government or bank loans too.

We understand this is a daunting time for many businesses in the UK and further afield, but with careful cash flow forecasting, you can move your business into the next phase ready for recovery.

Sign up for free 14-day trial of Float cash flow forecasting software today to plan for your business’s future.

Further reading:

How to Do Scenario Planning with Float

How Will Making Redundancies Impact Your Cash Flow?

Louise Bayley-Boyd

Digital enthusiast, passionate about helping small businesses survive and thrive.