Maximising cash flow has never been more important

Business owners are currently or likely to be facing major cash flow challenges.  The Chancellor’s announcement of his ‘Bazooka’ £350bn rescue plan for Coronavirus-hit businesses was a welcome bit of good intention and heroic rhetoric, but as always the devil for owners and managers will be in the detail.

How do I keep my business running?

The first priority is of course to find out exactly what is on offer for your particular business and how to access it. The suggestion is that it should be as formality free as possible, but we all know it won’t be that simple.

A particular concern will be the swarm of con artists and scammers who will flock to this enormous honeypot, ready to exploit and cheat desperate businesses. It’s vital to avoid them and only use trusted advisers to help you apply for the cash, if you need outside assistance.

Managing cash flow challenges

Another problem is much of the rescue funding will be loans, rather than cash grants. In the rush to bolster your evaporating working capital, it’s easy to forget this money will have to be repaid eventually. The less you borrow now, the smaller that future millstone will be for your recovering business.  This means doing all you can to generate cash in other ways.

Get on with collecting the money you’re owed. Be firm in the face of pleas of cash flow problems. An overdue debtor is playing with your overdraft and your future. If you’re slow off the mark, your debtor may go bust before you collect. The new Small Business Commissioner, Philip King is a credit management expert. Check out the SBC website for guidance on cash collection and enforcement strategies.

If you have any surplus assets like equipment or inventory, turn them into cash. Don’t worry if you make a loss; cash is way more important than your P&L account right now.

Review your expenditure

Take a look at every single item of expenditure. If it’s not absolutely essential to your survival, cut it and cut it now. Waiting to see if things improve is not an option in this awful crisis. Can you defer paying for costs you can’t avoid? Speak with your landlord about a rent holiday or paying monthly instead of quarterly. See if you can lengthen credit terms with suppliers. They may say no, but ‘don’t ask, don’t get’.

Talk to competitors; can you work together to save money? Maybe you can all agree not to destroy each other with predatory price cutting. Some major construction companies have already set up a joint working party with exactly this objective.

Think before laying people off

The elephant in the cash flow room is staff. Laying people off gives a quick cash boost. But, think carefully about the future and how you’ll operate without them when the recovery starts. If there’s one area where a little constructive kindness is both acceptable and sensible, this is it.

Concerns on trading whilst insolvent

Last of all, many businesses are now at risk of trading while insolvent, which is one topic where you need to go avoid Google and talk instead to an expert professional. The downside of getting that wrong can be extremely painful for directors and business owners.

Find out more

We’re here to help, please contact us at rescue@opusllp.com or call any of our offices.

You can also use the scheduler below if you would like to request a confidential call regarding cash flow or other issues with one of our partners.