Managing cash flow during the pandemic

For those impacted by the Covid-19 pandemic it is important to understand cash flow. The impact of less cash coming in from customers mixed with payments that need to be made and commitments to employees will more than likely lead to a quick deterioration in cash balances. One of the first steps we recommend is forecasting cash flows for the next four or five months. This does need to carefully identify on a monthly basis the cash you expect to receive and pay out. This cash flow forecast should also include estimates for various tax payments, corporation tax, VAT and PAYE together with when you expect to receive grant money coming in. Armed with this information you will be able to make some decisions about what mitigating actions you might be able to take. The following points can help maintain a fluid movement of cash into your business:

• Invoicing – for those who issue invoices, consider issuing them more regularly and invoicing upfront or sending interim bills. Consider offering discounts, for example 5% if payment is made within seven days, to bring forward receipt of the money.
• Debt Collection - if you use a cloud-based accounting package, look at the possibility of automating your debt collection system, for example Chaser. If you have debts beyond your payment terms look at placing the invoice with a debt collection company. If customers are struggling to pay be flexible and allow a payment plan by way of monthly direct debit.
• Stock – consider realising and reducing stock.
• Payment to creditors - contact your suppliers to discuss extending terms or agreeing a payment plan. If offered an early payment discount by individual suppliers, look at settling their invoices first.
• Capital expenditure – consider delaying capital expenditure or if essential consider lease or HP.
• Loans and HP – discuss payment holidays with lenders and extending the terms of the hire purchase agreements to reduce the monthly payments.
• Cash - transfer any excess cash into a deposit account.
• Rents - approach landlords for deferred lease payments.
• Losses – consider changing accounts year ends to maximise loss relief for the next tax payment.