Angus Brewer Business & Tax Consultant

5 tips for cash flow forecasting and management during the Coronavirus crisis 

With nearly a quarter of companies in the UK temporarily ceasing trading because of the Coronavirus lockdown and the majority of those still operating reporting a lower turnover than normal (ONS), many small businesses could be forced to make difficult decisions in the coming weeks.
 
Depending on their financial position, some businesses could well start to experience cash flow struggles in the coming months.

However, the important point is to not let the cashflow struggles become a financial impossibility. It is imperative that businesses stay liquid at all times. After all, cash is king.

To help weather through some turbulent cash cycles, business owners should ensure they spend some quality time on cash flow forecasting and management. This can either be actioned in-house or by your external accountants and advisers. 

Follow these tips below on cash flow forecasting and management during the Coronavirus crisis:

Focus on debtor collection to ensure you’re getting cash in from customers on time

It is important to have a clear process and focus for debtor collection, including at which point debts are referred to a legal procedure for enforcement of payment. This will help to reduce the risk of bad debts in the future. Be sympathetic but firm with your customers – with all the Government support that has been made available to businesses, it is key that you insist on getting paid on time.

Set a realistic cash flow forecast for the next 6-12 months  

As we have seen with the spread of the Coronavirus, the situation can evolve quickly, and business owners will need to make fast, well-informed decisions. To ensure you can react quickly, it is important to forecast for various eventualities and scenarios over the next 6-12 months. 

Monitor cash flow on a week by week basis

The best way to keep track of upcoming cash flow trends on a short-term basis, is to have a realistic week by week cashflow forecast. This is usually best managed by the business owners or in-house, and we have a very useful template for this here.

Be prudent in your business operations and sales numbers

If you predicted or have found sales to be down during the lockdown, how can you cut back on additional costs to remain profitable, or at least break-even? You may want to review stock requirements in the lockdown and consider what you can hold back on purchasing.  Also, be realistic on sales numbers, and therefore stock requirements as we come out of lockdown. For more cost saving ideas, click here. 

Provide regular reporting to all business owners / directors 

Allow the management team to make better, more informed business decisions by offering reporting that gives a true picture of how the business is performing on a week by week and monthly basis.  Keep management regularly informed of current bank balances, bank facilities available, and upcoming forecasts. 

We’re here to help you navigate your way through the Coronavirus crisis, one step at a time. 

Whether it’s helping you with cashflow forecasting and scenarios, or implementing regular management reports -  Get in touch for support and advice. Let’s work together to grow and strengthen your business.