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Cash is King – 10 critical steps for cash management

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Mark Perrin - Menzies Accountant

Mark Perrin – Strategic Advisory Partner
DD: +44 (0)1489 566702

In a pandemic such as this, it is more important than ever to understand and manage the cash flow of your business. This would include preparing a detailed short term cash flow projection.

Ten Critical Steps to Consider for Cash Flow Management

number 1

Loan (capital) repayment holidays

Speak to your Menzies Relationship Partner about talking with your bank and other lenders you have borrowed money from to see if you can agree a loan repayment holiday to assist with cash flow. The communications need to be carefully managed.

Don’t forget this may also be applicable to debts with leasing companies.

number 2

Time to pay government taxes

The government has announced that all businesses and self-employed people in financial distress, and with outstanding tax liabilities, may be eligible to receive support for their tax affairs through HMRC’s Time to Pay service.  This may help your business in the short term.

number 3

Support for Businesses That Pay Rates

The government is introducing a business rates holiday for retail, hospitality and leisure businesses for 2020 to 2021 tax year.

number 4

Overhead reduction

Consider what  overheads can be delayed, reduced or avoided.

Consider what overheads could be renegotiated in the current climate.

number 5

Managing Staff Costs

The toughest decisions businesses face are in respect of staff retention as business levels reduce as a direct result of the impact of Coronavirus.

There is specific legislation covering lay-offs and short-time working. Businesses can ask staff to stay at home or take unpaid leave if there is not enough work for them to do. It is important you understand how to apply the legislation, please consult Menzies HR Services to guide you through this.

number 6

Coronavirus Business Interruption Loan Scheme (“CBILS”)

The government announced the CBILS to help businesses impacted by the Coronavirus. Key information:

  • Businesses with less than £45m turnover
  • All businesses affected by Covid-19 are eligible except banks insurance and public sector businesses, only a very few exceptions
  • A sound borrowing proposal is required
  • Amount – £1,000 to £5,000,000
  • Term – Up to 6 years
  • Interest – Interest free for the first 12 months followed by sensible low rates
  • Capital repayment holiday (at lenders discretion 12 months on offer from several)
  • Fees – No arrangement fees are being levied
  • Available through 40 lenders including the high street banks
  • Administered by the British Business Bank.

A package of information may be required as part of the application which should include the latest annual accounts, current management accounts and forecasts along with details of other measures implemented.

These are being made available from 23 March 2020 initially for six months.

Large Business’ CBILS

This scheme is set to launch on Monday 20th April. here is a summary of key criteria and amounts (as currently understood):

  • Businesses with turnover greater than £45m
  • Loans up to £25m, or £50m if turnover is greater than £250m 
  • Available if the business is unable to source regular finance
  • The Government will provide the lender with an 80% Guarantee
  • Confirmation is also provided that PE firms will be able to access the scheme.
number 7

Debtor collection

Allocate time and resource to collecting cash from debtors as soon as possible.

number 8

Current and future sales

Consider whether future sales should be covered by deposits or cash in advance given the current economic environment.

Review existing sales orders and identify those which you can convert to cash in the quickest time frame and those which are the most profitable and prioritise.

Consider how much work is on your current order book, what new work may arise and how long it will take before this is exhausted.

Consider the ability of your staff and supply chain to deliver goods and services in a timely manner to help you fulfil your customer orders.

Consider what contractual liabilities may arise for contractual breaches where you cannot fulfil what you agreed with customers. Can you re-negotiate clauses with customers given the exceptional circumstances?

number 9

Other sources of funds – owners capital injection and other government initiatives

Consider and review what other government initiatives may help you and whether the owners can afford to invest capital to help the business through the short term.

number 10

Prioritising Supplier Payments

Clearly considering supplier payments is a matter that needs thought and cannot be ignored.  We have left this to Step 10 of our proposal as we believe in these difficult times that it is important to be fair to our fellow businesses.  We are all in the same boat and it simply isn’t right to pass on problems that we know will cause hardship where we can avoid it.  For us it is about being fair and using this measure as an absolute last resort.

We understand that as the situation continues to evolve all businesses will need to adapt and in the first instance would strongly recommend all SME businesses take a step back to look at how your business is going to be affected in this current climate and speak to your banks to understand all options available to them.

Please do get in touch with us to discuss your concerns and the strategic support we may be able to offer you and your business.

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