How can I stay on top of cash flow during the coronavirus shutdown?

In this article, Jill Morris (Director – Cloud Accounting and soon to be Partner at PM+M) offers some great tips on keeping your business afloat whilst working remotely.

The Government’s latest measures to stop the spread of COVID-19 mean that for the foreseeable, many of us will see ourselves working from home. Although this is a positive step towards the health and safety of our country, many businesses are suffering as a result from reduced demand and slowing cash flow, on top of monthly overheads and wages to pay.

The support options announced by the Government are significant and focused on ensuring that businesses can get back up and running quickly once the pandemic subsides.

The ability to do this, however, will mean managing your cash throughout this challenging period. I have outlined a few key tips on how to do this below:

 

1. Keep your financial information up to date and readily available

By staying on top of your accounts, you will be able to avoid unexpected demands and ensure resilience. Digitalisation of your records in cloud accounting platforms like Xero or QuickBooks Online can be transformative in both giving you easy access to your records but also to enabling you to see where your cash is tied up and what your fixed costs are (click here to view our demo of Xero).

If your financial information is already in digital format, make sure you’re making full use of the software features available (e.g. automation), why not take advantage of what’s out there?

As an example, Receipt Bank is a great app which collates all your invoices to one portal, for multiple users to upload, access and post in to your accounts software (see our recent blog for more details). Receipt Bank is ideal for remote working conditions, so if you’re not already using it, let me know and I can set this up for you straight away.

 

2. Make a cash flow business plan

To do this, you’re going to have to think about some difficult scenarios, but now is the best time to consider all avenues to ensure you are well prepared.

Some examples of things to think about are below:

– What if you lose your biggest client? How long can you survive on the revenue from other customers?

– What if revenue gradually reduces by 10%, 20%, 30%? What % is the red zone? If you lower prices or demand reduces then you need to keep this in mind.

– What if your cost of sales prices rise by 10%, 20%, 30%? What % is the red zone?

– What combination of the above is devastating?

– What if customers pay you later than usual? +15, +30, +60 days?

Your cash flow business plan could include best-case and worst-case scenarios so that you can build a clear strategy for your business. The plan should show you what your ongoing fixed costs are, taking into account any of the Government support available to you.

You will then be able to clearly consider your cash levels, requirement for funding options and ways you can deal with a gap between your outgoing and incoming cash flow.

 

3. Take action now

– If people owe you money, make sure you chase this now

– Speak to your landlord – find out whether they are able to offer you any discount or payment break

– Is your tax or PAYE due? Speak to HMRC to see if you can arrange a payment plan – the Government’s new ‘Time to Pay’ scheme may offer some support in this area (see our recent blog)

– Do you have debt or loan repayments? Again, think about asking for a payment holiday

– Consider whether you should be insuring your sales invoices?

– Check your eligibility for any grants – the Government are currently offering a range of support, make sure you take a look at our recent blog which covers this

 

4. Track your cash flow as often as you can

Monitor your plans (outlined in point 2) regularly to keep an eye on whether there are any gaps in your cash flow.

Worst case scenario, you may need to take out a loan to see you through the short term. Many UK banks will advance £25k without a full 3-year forecast. If you use Xero, Iwoca will fund up to £200k. The criteria will be different for every business and there are other providers of course. BUT, before you take a loan, you must know whether you can afford the repayments.

If you are worried about your business during this uncertain time, there are a variety of support measures available to UK businesses that have been introduced by the Government. Please visit our coronavirus support hub for more detailed blogs on the support available and how to access the new schemes.

If you would like advice on setting up cloud accounting software, or support with cash flow planning and forecasting, please do not hesitate to get in touch with me using the button below.

 

This information is correct as of 26 March 2020. This blog is for general guidance only. Recipients should not act upon any of the information provided without seeking specific professional advice tailored to your circumstances, requirements or needs. Please contact PM+M before making any decisions based on any matters relating to this blog.

For more information about anything in the above article, please get in touch using the button below.
Jill Morris
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