Sarah Ghosh4/28/2020 16:14:44

Cash Flow is Reality


The impact of coronavirus continues to cascade through our personal and professional lives.  The after effects can only be imagined, but one thing is still true : regardless of what businesses are grappling with to build future resilience – cash flow is still a reality.


The focus has to be on managing cash flow on a daily basis, and taking the necessary steps to maximize cash and reduce or defer costs as much as possible in the short term.


So how do you manage your cash flow in these unprecedented times?  


Re-forecasting


Your cash flow over the next 12 months needs to be scrutinised and re-forecast.  Being able to estimate a breakeven position where you can still pay all of your full cost commitments with what you are bringing in on a daily basis will not be straightforward. We have seen over the last few weeks how Government announcements to manage both the economic and health impact have opened up avenues of financial support but also changed the nation’s consumer behaviour.  All of these external influences have a direct impact on cash availability.  As a starting point estimate your cash flow excluding any support packages.  This will give the true extent of your cash position, and the size of any shortfalls.  The focus will then be how to manage the shortfalls, but be aware that taking decisions that erode assets will have a medium and longer term impact.   


Access to Loans


Investigate all of the avenues open to your business to secure a loan, be it through banks, personal cash injections or government support packages. If you have existing loans in place, re-negotiate terms and repayment plans based on what you know today.  The government wants to preserve capacity in the economy and the policies they have put in place are geared towards enabling more companies to come out of this crisis.


Negotiate with Suppliers


In ‘normal’ situations you would discuss payment options with your suppliers and re-negotiate payment terms over a longer time period, perhaps with a fee for doing so.  However, supply chains are under immense pressure and suppliers themselves will be facing the same dilemmas you are.   You will need to agree which payments can be made within the payment terms.  Depending on your cash position, it may be that you want to help a trusted supplier at this difficult time and pay early.   Whatever agreements you come to with your suppliers, it is important to keep in mind that offering any support to them will benefit your ongoing relationship when things start to get back to normal.


Negotiate with Customers


Review your list of customers who currently owe money to you.  Focus on recent monies owed rather than on older debt at this stage.  You need to work through the list and contact each customer to confirm when payment can feasibly be made.  Unfortunately some companies are not likely to survive this uncertain period because of their own cash flow challenges, so be realistic about what can be recovered.


Re-negotiate Contracts


If you have contracts with agreed deliverables and payment schedules it is important to start the conversations now on what can realistically be achieved. Revisiting staged payments requires an open and honest discussion on what is feasible, as it is also likely that the company you are contracted with will also be struggling to meet their obligations.   For service contracts where hours of support are stated on a weekly / monthly basis this may not be achievable with a reduced workforce.  Ensure that the negotiations are clear on carrying over the hours that could not be delivered.


Payment Holidays


Take advantage of payment holidays.  The government has put in place a number of schemes that will alleviate the pressure on short-term cash flow.


For detailed information on Government schemes available:


https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-support-for-businesses


These are a few areas to consider when re-thinking your cash flow position.  Above all, this is a time for collaboration across your business ecosystem.  Learn from others, negotiate to keep supply chains moving as much as possible.  Everything we do to keep a sense of normality in these unprecedented times will speed economic recovery and minimize the fallout. 



Sarah Ghosh

Director - Onyx AI