Kay Brookes, Partner at Bates Weston offers practical steps that businesses can take to protect cash flow during the Covid-19 outbreak.

“We are currently facing unprecedented circumstances and the impact of the Coronavirus will be far-reaching.  The financial uncertainties for both businesses and individuals will add further pressure in what had already been challenging trading conditions.

In order to provide help and support in connection with cashflow management we have revisited one of our earlier articles and include the following suggestions:

  • Monitor stock levels and don’t tie up cash in unnecessary stock
  • Chase outstanding debts
  • Incentivise early payment of your invoices
  • Enforce late payment penalties
  • Negotiate payment terms with suppliers, paying later or in instalments
  • Reduce overheads
  • Increase sales prices/lower cost prices (shop around, negotiate discounts)
  • Make better use of assets -hire out excess warehousing space, or underused transport
  • Sell any excess assets
  • Produce 13-week cashflow forecasts
  • Run what if scenarios
  • Consider sales trends
  • Consider digital record keeping/Online accounting – invoicing/payment reminders

With regard to managing liabilities:

  • Regular contact with the bank during these difficult times will ensure that they are fully appraised of the trading situation and your ability to meet covenants etc.
  • The government has announced a raft of measures to assist businesses during these difficult times, the detail of which is yet to come, but banks will be frontline in assisting with this.
  • It may be possible to negotiate ‘payment holidays’ on loan/HP arrangements for a short period, these must be arranged by consent and consideration given to any penalty charges which may be incurred.
  • Director’s should take advice when introducing personal monies to consider what if any protection is required should the company fail.
  • All strategic board decisions made during these difficult times should be recorded in directors’ meeting minutes to document the process in the event that there is a subsequent business failure

Staff matters:

  • It is essential to seek advice in connection with all staff matters to avoid exposure to litigation. There are options available such as short time working, prescribed holidays etc. but this must be dealt with correctly.
  • The Statutory Sick Pay regulations have been amended to assist with staff absences and again advice is advised.

The Government has published guidance in relation to support for businesses. It details information on grants and loan schemes. The guidance is subject to change on a regular basis at present as the situation develops. We have also summarised the major announcements made to 19 March on our website.

A dedicated Coronavirus helpline has been set up on Gov.uk to support businesses and the self-employed who may be struggling to pay their tax, offering a time-to-pay option or temporarily suspending debt collection proceedings depending on individual circumstances.

We fully appreciate the challenges of operating in these uncertain times. We recommend seeking advice early so that steps can be taken to cope with any adverse effects, so please get in touch as we will be happy to help.”