How to preserve your cashflow during COVID-19
As the saying goes, turnover is vanity, profit is sanity and cash flow is king. And never has that saying been ever truer. Use this tips sheet to help you preserve your cash flow so you are ready and able to trade again as normal when the restrictions lift.
Tip 1: Know when you are going to run out of cash
It is really easy to get caught up in hysteria and believe that your business is going to go bust. When we recently spoke with an insolvency practitioner, they told us that only 5% of the calls they are receiving at the moment are for businesses that are genuinely insolvent. If you haven’t already, it’s time to look at how long your cash will last if the lockdown restrictions remain. (If you need help with this, then let us know) When you know how long your cash will last you then you can take sensible decisions in regards to your business.
Tip 2: Make sure your books are up to date
I know we accountants are always telling you to keep your books up to date. But it now more important than ever to know the true picture of your finances. If you don’t know what you owe and what is owed to you then, you can’t take the right decisions. For those of you still relying on spreadsheets or desktop software for your books, now is the time to go onto the cloud. We, as a firm, can’t easily advise you if we are looking at out of date figures. And the benefit of the cloud is we can see exactly what you can see.
Tip 3: Look to take advantage of all the government financial help which is available right now
The best type of borrowing is the borrowing you don’t have to pay back. And there are grants worth £10k or £25k for most small businesses with premises who pay rates or who get small business rates relief. If you haven’t already claimed your grant from your local authority then give us a call. Once you’ve checked this look at the following to see if your business is eligible:
Deferment of VAT payments
Coronavirus Job Retention Scheme
Paid sick pay
Business rates relief
Accessing a Coronavirus Business Interruption Loan
Tip 4: Analyse your business costs and pare it back to the bare essentials
Now is the time to examine your overheads. What exactly can you eliminate or cut back on and still be, either able to trade, or be able to trade when the restrictions are lifted?
Tip 5: Do you have an opportunity to reduce your wage bill?
Wages are often a business’s biggest costs. Which of your employees can you Furlough or make redundant in order to save costs? If you believe you wouldn’t be able to employ your whole team again after the lockdown restrictions are lifted, you may be better off in making them redundant now.
Tip 6: Prioritise actions which are the quickest ways to generate cash
Normally they are in this order:
Chase late payers
Change your payment terms to get paid quicker with current customers or clients
Give long-term customers/clients the opportunity to pay in advance for work (potentially with a discount added?)
Bill any customer/client with outstanding work which can be invoiced
Focus your sales team on your warm leads
Consider what can be your business equivalent of a ‘toilet roll’, i.e. what can you change about the product/service you deliver or how you deliver it which will make it an ‘in-demand’ item?