Like much of the world, the UK economy is in a state of limbo, the likes of which hasn’t been seen since World War II. In order to prevent the spread of the COVID-19 virus and protect our NHS, businesses across the country have closed their doors as the nation goes into lockdown.
Many businesses of all shapes and sizes have had to reduce employee pay and facilitate remote working in order to avoid laying off staff due to the crisis.
Consumer interest is at an all-time low as workers across the country are feeling the pinch. Maintaining a healthy level of liquidity can be a challenge for businesses at the best of times.
Hopefully, this will be the last pandemic of its kind that we see in our lifetimes. Still, that doesn’t mean that it’s the last period of economic difficulty that your business will face.
When things go into “crisis mode” planning your finances and maintaining your cash flow can make all the difference between staying afloat, or going under.
Here we’ll look at ways to plan and protect your business cash flow in times of crisis.
Apply for government support
For obvious reasons, it’s in the government’s best interests to try and keep the economy as functional as possible, even in times of crisis.
Even the most devout small-state capitalist has to swallow their pride and reach out for government support when their market no longer functions well enough for them to stay in business.
At present, for example, businesses and sole traders can take advantage of a range of business support measures. There’s a Coronavirus Business Interruption Loan as well as deferring VAT payments, claiming back employees’ SSP and deferring self-assessment.
However, while businesses can, and should make use of whatever government support is available, it’s important to notice that government support schemes are rarely infallible. The current package, for instance, may sound impressive at £330 bn. However, small businesses are still left vulnerable.
Negotiate with your vendors
Whatever crisis may have befallen your business, it may also have befallen your vendors. As such, they may be amenable to negotiating terms of repayment and extend a line of credit.
They will have their own cash flow quandaries to worry about and will likely prefer to receive staggered repayments in a timely manner rather than wait longer for payment in full.
Maintaining open and honest communications with your vendors at all times is key, as is paying in a timely manner whenever you are able. The easier you make their lives during fair weather, the more likely they’ll be to help you when times are hard.
Take stock of your receivables
Knowing what’s coming to you and when is imperative when it comes to managing your cash flow.
Incentivise early repayments with discounts and maintain strict and consistent rules when extending credit. You also need to invest in an accounting platform or service which helps you to stay up to date with what is outstanding and from whom.
Get creative to incentivise sales
All over the country, businesses have had to adapt in their operations to retain the interest of their market.
Even if you have to make drastic changes to the way you operate, you can still incentivise sales with a little creativity and marketing flair.
Consumers are likely to remember which businesses can still provide a quality service for them, even in times of crisis.
Maintain visibility over your accounting infrastructure
Many owners SMEs have to wear many hats, assuming a broad range of responsibilities. As a result, managing their accounts effectively can prove challenging.
With poor visibility over their accounting infrastructure, it can be much harder to identify when receivables are incoming and when accounts are due. Poor visibility can exacerbate cash flow problems.
A Chartered Accountant like BrooksCity for example, can be invaluable in helping businesses balance their books and get a clearer view of the big picture, while also staying on the right side of compliance. Let alone help you take advantage of all the government support available to small businesses.