Cash is King – steps to take to preserve your cashflow

As we come out of lockdown, businesses may need more working capital available to get back up and running. Coupled with holiday periods for loan and rental payments coming to an end, the pressure on cashflow will be huge.

Businesses need to take control to preserve their cash and should consider the following:

Debtor Control

• Issuing invoices to your customers at the earliest opportunity, including interim fees if possible.
• Reviewing your aged debtors report regularly and consider cash upfront for slow-paying customers.
• Set credit limits and monitor your customers closely.
• Reviewing existing credit processes and carrying out credit checks on all potential new customers.
• Asking your customers to make deposits at the time orders are taken.
• Potentially offering discounts to your customers for early payment of invoices.
• Consider invoice finance as a way of enhancing cash flow.

Expense Control

• Review all areas of expenditure (particularly discretionary spending) in the business and see where any expenses can be cut or search for alternative providers.
• Request quotes (particularly fixed fees) for any major expense items (in order to avoid unnecessary surprises).
• Review insurance policies both in terms of the premium and the level of cover provided.
• Ensure you keep a control of budgeted costs on jobs. Do you have robust job costing in place?
• Take advantage of credit terms and request extended terms if possible. Keep in communication with your suppliers to build up trust with them.
• Could you consider requesting a discount on invoices for paying upfront or early?
• Remember that, when seeking to cut costs, some might be seen as investments and should not be cut.

Tax Control

• Are you aware of your tax liabilities and all the deferral schemes that are currently in place? Budget for when the taxes fall due for payment.
• Are you able to negotiate payment plans with HMRC for taxes out with those in the deferral schemes?
• Does your business operate with the most tax efficient structure?
• Should you undertake a full review of your business to ensure you are operating tax efficiently?
• Do you undertake any R&D work, are you eligible for R&D Tax credits?

Finance Control

• Have you taken advantage of the Government Support Schemes?
• Should you consider a Coronavirus Interruption Loan or Bounce Back loan? – Remember deadlines are currently 30 September and 4 November respectively so give yourself plenty time.
• Can any finance agreements be renegotiated over a longer term or new finance raised to clear more expensive debt?
• Should you consider equity funding?

Asset Control

• Do you operate from a rented property, can you speak to your landlord, to agree concessions, rent reduction or other cash flow measures such as the payment of monthly (rather than quarterly) rent?
• If you own the property, do you need to consider refinancing?
• Can you let some of the property out to other tenants, can this also help reduce the rates burden on the property?
• Do you have any surplus assets that you could sell or hire out?
• Do you have the correct stock levels, do you have too much cash tied up in stock?

Considering the above will help to maintain cash, but it is vital that businesses prepare cashflow forecasts to anticipate any shortfalls in cash.

If you need support with any of the points above or would like assistance with your cashflow forecasts, please get in touch with our Corporate Finance specialists via corporatefinance@eqaccountants.co.uk or call one of our offices today.