Never before has the mantra ‘cash is king’ been so important. In these uncertain times it is vital to manage your business’ cash flow closely to ensure your business comes out the other side in good health
Moore Chartered Accountants offer their top tips to help youmanage cash flow so you can survive the pandemic and return to thrive once the worst of this is over.
1. SPEAK WITH YOUR STAFF
Clear communication should mean staff are more responsive to a variety of voluntary alternatives. These might be temporarily reduced hours, accelerated holiday schemes or salary cuts and deferments, which may avoid or reduce the need for redundancies. The government job retention scheme may also help you retain jobs for those where there is currently no work available.
2. CREATE A CASH FLOW FORECAST
All businesses need an accurate rolling 13-week cash flow forecast. This should be kept up to date and will show you all expected receipts and payments over the next three months. You can then understand your liquidity position and the levers you can pull to help it improve.
3. CREDIT CONTROL IS KEY
Get in touch with your customers to get firm payment dates for your invoices so you knowwhen cash will be coming in. This is key so that your cash flow forecast is based on accurate and timely information. Key to getting the money in is getting invoices out.
4. IDENTIFY YOUR CRUNCH POINTS
Once your bank receipts are accurately forecast add in your expected payments. Start with the regulars: salaries, PAYE, rent, rates, VAT, loan repayments, corporation tax payments, credit cards and direct debits. Then pull in your desired accounts payable schedule from your accounting system. This will start to give you a picture of your forecast cash flow. You will see crunch points around large outflows such as rent, VAT, loan repayment, PAYE and salaries. Once you know where your crunch points are, you can start to manage your payments to navigate them.
5. REVIEW NON-ESSENTIALS
Reducing or stopping any non-essential expenditure is sensible. This could include expenditure onmarketing, training and development, capital expenditure, internal projects, new and replacement staff.
6. USE THE HELP ON OFFER
The Chancellor has announced measures that will help manage your crunch points. The easiest of these to access will be the deferment of your next VAT payment (that falls before 30 June 2020) until 5 April 2021. Don’t forget to cancel your direct debit if you plan to use this. Many clients are also having success with asking HMRC for deferral of payment of two or three months’ worth of PAYE and NIC liabilities. HMRC is also agreeing to payment by instalments of corporation tax liabilities.
7. SPEAK TO YOUR BANK
Raise concerns as soon as you can. Your bank may be able to offer repayment holidays on business loans, relaxed banking covenants and short-term financial help. There is also the Coronavirus business interruption loan scheme, which can be accessed through your bank. As well as providing partial guarantees to the lender, the government will cover the first 12 months of interest payments as well as arrangement fees, so businesses will benefit from lower initial repayments. Youmay also be able to defer capital repayments for up to one year. The maximum amount that can be borrowed is £5 million but this is limited to 25% of turnover in 2019 or double the annual wage bill.
8. SPEAK TO YOUR CUSTOMERS
Get a handle on what work will still be coming in so you can plan how you will deliver it while staff work from home. Managing customers’ expectations needs better than ever communication and customer management. Reassure customers that your business is still able to support them. If some customers are in real trouble, you should consider asking them to pay your outstanding invoices before undertaking further work for them. For clients in a stronger financial position, youmay be able to agree upfront payment for work.
9. SPEAK TO YOUR LANDLORD
Landlords are willing to talk and may offer you help in terms of agreeing a period of arrears or a rent holiday.
10. SPEAK TO YOUR KEY SUPPLIERS
We recommend proactively speaking to suppliers to negotiate extended credit terms. Suppliers would rather you agree a payment date with them rather than simply defaulting on your obligations.
For further advice on managing your cashflow through this difficult time, contact Moore Chartered Accountants on 01733 397300 or visit www.moore.co.uk
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