22 Sep 2020 2:52 PM

Forward planning for the ‘what-ifs’ is the backbone of any business strategy. The impact of COVID-19 has meant that is ever more important. Scenario planning helps you to forecast potential problems in your business, lay out the possible alternative futures and anticipate them before you run out of cash.

At the start of the pandemic many businesses experienced significant cashflow difficulties because of the expenditure freeze created by the lockdown. The Government’s Coronavirus Business Interruption Loan Scheme (CBILS), Bounce Back Loan Scheme BBLS and the Coronavirus Job Retention Scheme (CJRS - referred to as the Furlough Scheme) have brought temporary relief. These schemes have helped businesses buy time to continue to trade and retain staff through this period. As furlough is phased out over the next month or so, businesses will have to start paying staff their full wages. With some already suffering a reduced cashflow the burden of a higher wage bill could result in business failures and unemployment. It’s important for businesses to start planning now and review cashflow forecasts.

Future planning

The ability to convert work in progress and debtors into cash is essential in order to keep on top of your business’ cashflow. Cash is king as we know, but companies must not ignore future planning and how to prepare for the recovery. It is important that businesses are being proactive with detailed cashflow modelling – this will help to find direction and take objective decisions, before it’s too late.

Key areas of focus include key performance indicators, cash flow forecasts, projected profit and loss and balance sheets, managing your debtors, creditors, and work in progress. Review your cash position daily so you understand the impact of lower sales and bad debt.

We understand that uncertainty in cashflow management can trip up even the most cautious and well-funded business. Many businesses fail not from lack of profit, but from a lack of cash.

We are currently working with businesses on areas including cashflow management, strategic planning and finance options to help them reposition themselves.

If you would like to talk about your situation and need practical advice on the way ahead please contact us.