Remember February 2020? It was only a few months ago but in business terms it feels like a lifetime.
At the time of writing, we have just entered phase two of lockdown exit and a new reality has set in for many businesses. How do we prepare for the next crucial phase of recovery?
One thing we do know is that recovery will happen, we just don’t know when.
Government support has provided a lifeline for many but as this scales down, what can we do to give our businesses the best chance of reaching the other side of this crisis?
Cash flow generation is central to your chances of success and forecasting cash flow over the recovery phase has never been more important. We asked leading accountants Acumen how they have been approaching this with clients.
Ross Murray, director at Acumen, said: “The starting point is what the position would have been without Covid, with hard/fixed costs identified and then scenarios around drops in turnover of 20, 30 and 40%.
“A focus on variable costs and possible reductions – for example, automation of finance/operational processes may quickly open up cash savings. Cash is what will keep your business alive – making a profit is great, but a paper profit doesn’t pay the bills and keep you fed.”
Understanding what cash you will need over the next three to six months is the main objective, so that gaps can be filled as they arise. There are a multitude of funding sources for business.
The Scottish Government, for example, has more than 20 sector-specific grants available. Working capital management can always be improved and overall refinance options, either through soft loans (CBIL/Bounce back) or traditional routes such as invoice and asset finance should be considered. You should seek help to do this for your business.
HMRC support has been useful, but as Acumen’s Sheena Martin warns: “For any business that has deferred tax payments, make sure that you forecast them in. It is really easy to miss these and lull yourself into a false sense of security.”
As part of the cash modelling process, there will be tipping points where alternatives need to be considered – usually when more personal funds need to be invested. Having a restructuring plan, a “Plan B”, removes some of the unknown, giving a fallback position to work from if conditions worsen.
It has never been more important to have a good team around you, and in particular, your accountant, as Ross Murray explains.
“Gone are the days when you see your accountant once a year to sign your accounts. A good accountant should have your best interests at heart, contact you regularly, hold you accountable, get satisfaction out of seeing you do well and be on that journey with you. Get in touch with us at Acumen if you want that kind of support.”
Similarly, good advice should the business run out of cash is essential – this is about getting you and your business through the crisis. For a free consultation on your restructuring and business rescue options – “Plan B” – contact us.
Simon Watson: 07432559945 / simon.watson@btguk.com
Thomas McKay: 07980837140/ thomas.mckay@btguk.com
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