Riding out uncertain times with financial clarity

Build a cashflow forecast for the next 12 months With a 12-month cashflow forecast, business owners can make decisions that reflect trends and changes in their industry. Make sure you keep in mind all expected receipts and payments to ensure you have a clear understanding of your liquidity position. You’ll need to review this regularly to ensure it remains accurate. Stay on top of credit control Understanding when you will receive payments from customers is vital. Remember, assumptions are not reliable. You need to be talking to your customers all of the time to ensure that you know when they expect to pay you and how much. Get invoices out quickly and be clear on your customers’ changed processes Make sure you are still getting invoices out as quickly as possible. Remember, many of your customers will be operating from home and their invoice receipt and approval process may have changed or been delayed. Make sure you know what their procedures are, confirm receipt of invoices and expected payment times. Make sure your staff understand any changes to procedure. Keep reviewing your costs Prepare an accurate schedule of your regular monthly and quarterly outgoings such as PAYE, VAT payments, rent, business rates and loans. Only with an accurate schedule will you be able to consider what payment decisions you may need to make in order to manage your cashflow. Expenditure you may have deemed important three weeks ago, may be less now. Keep reviewing your decisions. Speak to your landlord Most landlords are willing to talk. Discuss your position and see if you can agree a rent holiday, period of arrears or come to some compromise to give you some breathing space if cash is tight. From your bank to your landlord, it’s important to keep dialogue going. Talk to your suppliers Like you, your suppliers are trying to manage their cashflow. They are far more likely to be sympathetic and willing to negotiate credit terms or payment plans if you explain your position rather than wait for them to chase you. Activate Government support The raft of Government support measures is substantial, with more clarity around the detail, daily. Most businesses can access some or all of this support. Start with support that is easiest to access e.g deferring tax payments. For example, if your VAT payment falls before 30 June 2020, it will automatically be deferred until 31 March 2021. This now applies to all VAT registered businesses but not to VAT MOSS payments. Don’t forget to cancel your direct debit. Consider using HMRC’s ‘Time To Pay’ service to defer tax payments. Many businesses are having success in agreeing a few month’s deferral with HMRC. Bear in mind that these will need to be repaid in the future. For larger businesses – those with a turnover of up to £45 million, there is the option to apply for a loan under the Coronavirus Business Loan Scheme. This can be accessed via 40+accredited lenders., You’ll need to check that you’re eligible and approach an approved lender directly. On 4 May, the government will launch the Bounce Back Loan scheme which will provide support to small and medium-sized businesses. The Government will guarantee 100% of the loan. Loans will be up to the value of 25% of turnover with a cap of £50,000. It’s vital that the Government’s support helps businesses that need it. Having a speedy and simple process is crucial. We need to be mindful however that taking on debt is a tough decision for any small or medium sized business. Matthew Thorpe, managing partner of Haines Watts