Managing cash flow in a post-Covid world

Since the pandemic began, businesses of all shapes and sizes have struggled with the volatile financial market and the ongoing effects this has had on trading and in particular, cash. There have been a lot of questions about how to best manage cash flow in the short-term, but the reality is that for many sectors hit hardest by the coronavirus, business has effectively been mothballed for the past three months. With employees on furlough and help along the way in the form of government-backed loans and grants, it has been a critical time for cash reserves to ensure businesses are in a position to re-commence trading as lockdown lifts. As we now look to emerge from what could only be the first peak of the pandemic, it is important for management teams to be looking beyond the here and now, and putting the appropriate future-proofing measures in place to survive the uncertain time ahead. Manage costs Cash forecasting is not a new thing, but there is now a real sense of urgency to identify exposed areas and improve liquidity so they can adapt to the current economic climate. The businesses that had a good handle on their immediate cash flow when we went into lockdown in March are already a step ahead in mitigating that risk. As we return to some form of normality, management will need to ensure that their cost base is “right sized” to a level which reflects the inevitable reduction in turnover likely to afflict many businesses as a result of the crisis. Taking a hard look at the current cost base, including staff numbers and establishing where savings can be made will be key. Commencing this review as soon as possible will ensure businesses emerge stronger from this period of financial and operational challenge. For the start-up and SME community, there is resource out there to help with these questions, so look to local councils, enterprise partnerships and larger firms for advice. It is also vital for cash flow that you are able to benefit from government schemes where possible, such as the furlough scheme, rates relief and grants. The Coronavirus Business Interruption Loan Scheme (CBILS) and the Bounce Back Loan Scheme (BBLS) can also provide help and now the discretionary grant scheme accessed through local councils. Be resilient With the outlook shifting daily, it is easy to focus on just weathering the short-term impact. In fact, the business landscape has been shifting towards that more agile ‘here and now’ mind-set for some time, meaning we respond to change quickly and easily. It is one thing to look at your short-term cash flow and base business decisions on that, however, this crisis has rewritten the rules. We can be fairly certain that the business landscape will change for good. As Antonio Guterres, ninth Secretary-General of the United Nations, said: “the recovery from the Covid-19 crisis must lead to a different economy.” If there is one thing we should learn from this, it is that we need to also need to be considering mid to long-term business plans. Leaders need to be alert and tuned in to the reliance of their business and its liquidity, as well as how its customer base may change in a post-Covid world. If you are a retailer for example, how will buying habits change and how can you adapt your business model to be prepared for that? The businesses that have growth potential in the years to come will be the ones that shift from a "today" to "tomorrow" mind-set. They will be already be taking charge of cash flow forecasts and asking questions such as, ‘what will it take for my business to thrive in a post-Covid economy?’. Andrew Moss, corporate partner at DSG Chartered Accountants