Cashflow Planning for a second wave
Could your business survive a second Coronavirus lockdown?
It’s a real possibility that there could be a second wave of Coronavirus. While we all hope we can avoid it, as a business, you need to plan. Could your business weather the storm again if it had to? Cashflow planning for a second wave could be the difference between survival or closure.
What is cashflow planning?
In our guide to business terms, we defined cash flow as the total amount of money that comes in and goes out of your business. You use a cashflow forecast to predict how this will look over a set period – maybe 12 months. To keep an eagle eye on things, you can have a rolling forecast which you update every month or every week, always projecting 12 months into the future. We’ve outlined in more detail
Cashflow planning for a second wave
It makes good business sense to practice cashflow planning during the good times, so when it’s time to batten down the hatches, it’s even more important. Here are some ways to make cashflow planning and planning for a second wave easier.
Use cloud accounting – to truly understand your cashflow, you need up-to-date financial information. Using cloud accounting software, such as Xero and FreeAgent, will let you access your whole financial picture from anywhere, any time of the day or night. You can also send invoices and claim expenses online.
Understand your cash inflow – Do you know your terms of business? Do you make sure your clients know the payment terms? Make sure staff understand how important it is to collect payments. Regularly review your aged debtors schedule. Invest time in talking to those clients and agree a repayment schedule to get back the money you are owed. If you have a bookkeeper, make sure you communicate with them the payments you are chasing and let them help you manage your debtors.
Manage your cash outflow – when times are tough, luxuries may have to be put on hold. Look at your weekly, monthly and annual spending. Where could you make savings? Could you negotiate with your landlord or your IT provider, for example?
Speak to your suppliers to see if there are savings available in the short-term. Your supplier will wan t you to stay in business too, so early conversations around cost savings are a good idea. Could you speak to your bank about that overdraft facility or interest on the loan repayment?
Speak to an accountant about cashflow planning – It might seem counter intuitive to spend money on an accountant when you’re trying to save money. However, an accountant will look at your accounts and tell you if you’re paying too much tax. And they may notice areas of overspend that you could reduce. Often they work closely with other business advisers, so may also be able to put you in touch with someone who can advise on business funding and legal issues.
Hold some money in the bank – In uncertain times, it’s always advisable to keep some money in the bank. It’s your ‘in case of emergencies’ and ‘tax bill’ fund. When things have settled down and the business is more stable, some of that money can be used elsewhere.
Be critical and learn lessons – Take an honest look at how your business approached the pandemic initially. What lessons can you learn for any future lockdowns? Some of these changes will be financial ones, some will be about how you continue to reach your customers, for example.
In order for your business to weather future storms, it needs to be able to adapt. Be honest with your staff about what you think needs to change next time and ask for their input too.
I’ve improved my cashflow, but still need help
With all the very best cashflow planning, sometimes factors outside of your control will mean you need more financial help. Make sure you take the government support as and when it’s available, such as the furlough scheme.
You can also look to your bank for business loans or business credit cards. Could you sell property or equipment and then lease it back? There would be interest and tax implications with these, so professional guidance is advised here. You can find more advice on cashflow planning for a second wave on our website.
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About Liz Cordell
I’m an experienced copywriter, with a great attention to detail. Having previously held positions at a global publisher, a top 100 law firm and a Big Four professional services firm, I now work with clients across a range of industries. Whether it’s new content for a website or creating interesting blogs for my clients, I can create engaging copy that doesn’t take a lifetime to read.