Managing your cash flow in a crisis

We realise that businesses are facing huge challenges during these unprecedented times and one issue that is concerning companies large and small is maintaining cash flow. We asked Lee Humble at accountancy firm, MHA Tait Walker what key cash flow issues should be considered as we come out of lockdown.

Make sure numbers are up-to-date and keep them that way

It is vital you have an accurate understanding of your current cash position. Knowing your figures are up-to-date and correct will allow you to make educated strategic decisions, and knowing how your position might change in the future will assist in accessing any funding or grants that may be available to you. An uncertain, or incorrect starting position could cause problems further down the line. Keep your figures as up-to-date as possible – it is imperative that you have current and correct information at your fingertips.

Think of a range of scenarios which may be encountered and model these

In a quickly evolving situation such as this, it is important to plan and forecast for various eventualities over the next three, six and twelve months. Consider the best, medium and worst case scenarios. This should be based on historic trading and expected sales. Ask yourself questions such as ‘how quickly can we get back to normal trading?’, ‘how will customer’s ability to pay be affected?’, ‘how much working capital will I need?’. Modelling a number of different outcomes will enable you to react quickly and make fast, well-informed decisions.

How long before you run out of cash?

How long does your cash flow forecast suggest you have headroom without running out of cash? At least six months headroom is probably required as a minimum, but 12 months would be preferable. If your forecast headroom doesn’t extend to six months, prioritise creating liquidity. Consider one of the UK Government support loans such as the Coronavirus Business Interruption Loan Scheme, The Bounce Back Loan Scheme or the Future Fund. Get any identified funding requirement negotiated and agreed as quickly as possible. If you identify that, for example, your cash headroom runs out in five months, don’t wait until five months’ time to apply for funding.

Talk to all stakeholders

During a crisis situation, it is important that you maintain a good working relationship and have regular communication with all your stakeholders. Inform them of any updates immediately – their continued support will be needed more than ever!

Monitor developing events regularly

The UK Government is constantly updating and reviewing restrictions on businesses and assistance available. Keep an eye on their dedicated support page to current information on financial support schemes you may be eligible for. You will also be able to access general guidance on safely running your business from this website.