With many government schemes ending, what is next? During the Covid-19 pandemic, we welcomed a number of schemes from the government including the Coronavirus Job Retention Scheme (CJRS), Coronavirus Business Interruption Loan Scheme (CBILS) and Bounce Back Loan Scheme (BBLS) as well as government grants, VAT reductions and tax payment deferrals. It was also good to see a lot of companies working together to provide advice, guidance and payment plans, with the attitude that we are all in this together.
As we now move into the next phase where lockdown is easing and the UK is officially in a recession, the government schemes are coming to an end and there will inevitably be debt accumulating in most businesses.
We’re unsure if there will be a second wave or another lockdown, however what we can say for certain is;
- The furlough grants are ending
- CBILS and BBLS are ending
- Deferred Tax liabilities will need repaying
- Returning team members will need to be paid
- There will be a rise in redundancies across the UK
- VAT deferred will need to be repaid
It’s important to understand what areas you can and can’t control. The economy has plummeted into a recession and there’s not much we can do about it. However, you can prepare your business and make those critical decisions in order to survive.
Preparing a cashflow forecast and having real time financial information at your fingertips is one way and imperative when making decisions that will affect the future of your business. Businesses that are able to act quickly, respond to external circumstances and understand the opportunities available are those that will survive.
Empower your knowledge and answer any ‘what if’ scenarios, it is essential to have this knowledge readily available so you can decide the future of your company during the continued uncertainties.
It’s useful to reflect on what has happened over the past few months and how this has impacted on your available cash. Did you have any budgets? If so was there much of a comparison between budgets and actuals? Were the assumptions you originally made correct?
We may well be moving into a second wave and another lockdown period, so reflecting on the first wave is a suitable place to start.
Here are our tips for maintaining cash flow when there is a sudden interruption to business;
- Consider your whole supply chain and work with your suppliers and customers. It can be easy to forget the culture, values and brand of your business when the stress of managing cash flow takes over and survival mode kicks in. Hounding your customers for payment and delaying supplier payments without any communication may have a detrimental effect on the long term survival of your business.
Communication is imperative to continue to build relationships and trust. Discuss payment terms with your suppliers, there may be an opportunity to delay payment or put a payment plan in place. Also, it works the other way, do you know when your customers are likely to pay you?
Keep in mind people will remember how you behaved in uncertain times and it may completely destroy a relationship. Building strong relationships and collaborating with all parties in the supply chain will work in your favour to ultimately achieve a win;win;win situation.
2) Prepare a cash flow forecast – this isn’t revolutionary as most businesses will plan their upcoming cash flow especially when there is a sudden change in events. However, there are some tips on preparing a cash flow forecast that will make this exercise worthwhile:
- Firstly, real time information (RTI) is key to having fast and accessible knowledge to make vital business decisions. RTI isn’t powerful unless the accounting software is reconciled and up to date before you can start making assumptions and preparing a cash flow forecast. There are many cloud based options available for accounting software that integrate with cash flow forecasting apps (such as Xero and Float), making the whole process automated.
- Frustration comes from the unknown and uncertainty. When preparing a cash flow forecast under the current circumstances, an SME may feel stressed or under pressure to make accurate assumptions. Building flexibility into your cash flow model will enable you to tweak certain elements and provide a more realistic outcome. When more areas become known, the cash flow forecast can be flexed.
- As we go on this journey, we will pass through various different stages, starting with initial shock of how I am going to survive and will we get through this. Eventually, once coming to terms with the initial impact such events may have on your business, you may start to consider various different options such as alternative revenue streams, redundancies, pay cuts and so on.
It is easier to make these decisions once you have established your current cash position and the market demand. Scenario planning is the next level of cash flow forecasting and can provide further clarity on the future direction of your business.
3) Think outside the box – reach out to your network and professional advisors to ensure you understand what support is available and what the best approach in applying for this support is. You’re not alone and dealing with this on your own may not provide you with the best outcome and opportunities could be missed.
4) Take the time to review your outgoings – how many businesses stick with the same supplier or service provider without reviewing the value for money? The answer is a lot! With the best intention in the world, most small business owners do not have the time to review all of their costs. However, now is the time to do this and review alternative options. For example is it cheaper to outsource HR, finance or marketing than employ? Are you getting the best deal for your utilities and software support?
Remember that you are not alone. Lots of businesses are experiencing the same challenges and are finding it tough. We are here to support you and your business and can provide expert advice on planning for uncertainty.
UHY Hacker Young (East) have partnered with Float to offer a real-time cashflow forecasting solution. Float is an award-winning cash flow forecasting software that integrates with Xero, Quickbooks and Free Agent to provide a real-time, visual view of your cash flow. Find out more here.
Upcoming webinars to help protect your business
In our latest series of webinars, we take a look at how our journey through the continuing pandemic may play out over the next few months. We will bring together a number of specialist providers who will share their knowledge, tools and techniques to help you navigate safely through whatever lies ahead. You can sign up to attend here.