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It is an old business adage that cash flow is king. This has proven to be even more relevant during the coronavirus pandemic, with dramatic trading restrictions creating revenue gaps across the country.

According to a recent study, 44% of businesses reported only one to three months’ worth of cash in reserve in April of this year – showing that many were not equipped for the impact of coronavirus. 

Whatever situation you’ve found yourself in, good habits on managing cash flow will help your business succeed both now and in the future. So, to help, Katie Deacon of Funding Circle has written this guide on how to manage cash flow with tips for difficult times. 

Make a cash flow plan

With the current uncertainty, you may think the idea of a cash flow forecast is a waste of time. However, even if things change drastically, having a week-by-week plan will give you something to measure against. You’ll then know whether you’re on track or behind and be able to adjust accordingly. 

If predictions are too variable, create good, average and bad scenarios. Focus on cash, not profit, and set business goals for six and 12 months’ time. Your cash flow plan will then detail how you’re going to achieve them.

Include all your expected incomings and outgoings. That's wages, tax, Government support, inventory, overheads, sales, invoices – the whole lot. This will highlight gaps (if you hadn’t spotted them already), how big they are and how long you’ll need to bridge them for. 

Make contingency plans too, what would you do if there’s another lockdown? Would you need to find new customers? Can you increase marketing if you need to? Should you get finance now to make yourself more resilient? Have answers ready for all these questions and you’ll be ready to take swift action for different eventualities.

Monitor your cash flow

Now you’ve got your plan in place, you need to keep tabs on how your cash flow is doing. You may have been checking daily over recent months anyway, but if not, check at least once a week and more if you need to. If you don’t have time to do it yourself, make it someone’s responsibility and ensure they’ve been trained properly.

There’s a host of apps out there that can help make this easier. Some will integrate with your accounting software, if you use QuickBooks they have a cash flow add-on, and Google Sheets have free templates you can download. They can reduce the time you spend collating your info, and help you track your cash flow against your forecast.

Try to build certainty into your payments and invoicing

While many businesses are operating normally, others are facing big holes due to unpaid invoices. Even in normal times, there will always be unavoidable delays or changing circumstances, but there are steps you can take to reduce their impact.

Payments terms

Set clearly defined payment terms, make sure they’re in writing and you communicate them to your clients. Without this you won’t know when you should get paid, or when to chase.

Invoice promptly

Send your invoice as soon as work is complete – you won’t get paid until you do. Send it by email so you have a record.

Get partial payments

For long contracts, get partial or staggered payments. It could be 10% deposit to get started, 40% at half way and 50% on completion. Make sure you have enough cash flow to complete the job.

Fixed rate payment packages

Billing hourly or day rates can be very unpredictable week to week. If you have regular clients, think about setting up a retainer. This will give you a fixed income and payment in advance, rather than an unreliable income in arrears.

Make it easy for people to pay you

Avoid asking for payment by cheque, it can be a hassle and causes delays. Bank transfer should be the norm, but direct debit could be even better. By giving the option to be paid by direct debit, you’ll have a regular income that you won’t have to chase or manage, and it’s less effort for the client too.

Get extra cash flow before you need it

When you complete your plan, you’ll have a clear picture of where you are and where you’re going. If you need to plug a gap, then you should consider external options such as a business loan. There are various Government-backed loan schemes available at the moment offering better than usual features, such as no repayments for the first 12 months.

Getting ahead of the curve will also make life much easier. If you wait until your cash flow is down and your business is struggling, you may find it harder to get credit. Even if you look strong throughout the year, having extra cash flow can make you both more resilient and open up opportunities. You’ll have more flexibility to deal with uncertainty and to open up new revenue streams.

What to do if your cash flow drops

As mentioned above, you should have a contingency plan in place for different scenarios. These are always important, but are particularly so now. Clients could go out of business and contracts could be lost, or unexpected repairs could appear from nowhere. If your cash flow dips below where you need it to be, there are a few things you can do to turn it around:

Delay payables

If you have any leeway when it comes to paying suppliers, then use whatever time your contract will allow. If you have good relationships, see if you can get an extension.

Sell assets

Cash in on any assets that can be spared. You could also sell equipment you own and then lease a replacement.

Run promotions

If you have outstanding contracts or invoices, you could offer a discount if they’re paid early. It could be money off now or in the future. If there are any promotions that have performed well in the past they could be a good banker to turn to.

Get credit

Again it’s often better to get credit set up before you need it, but if you run into trouble then it is still an option. Credit cards, overdrafts and invoice financing can give you quick access to extra cash flow. Online lenders such as Funding Circle can also provide cash flow loans in a matter of days.

Government support

There have been many packages, grants, loan schemes, tax breaks and more announced by the Government that may be able to help you. Each will have different dates and criteria, so check or your local authority for the latest information on what support is available for you. 

You may be eligible to boost your cash flow with a loan of £50,001 to £250,000 under the Government’s Coronavirus Business Interruption Loan Scheme (CBILS). If you have any questions about how to access CBILS please talk to your local TaxAssist Accountant on 01522 699870 or use the online enquiry form for a free initial consultation.

Funding Circle is the UK’s number 1 platform for small business loans, having helped over 57,000 UK businesses borrow over £5.8 billion. They are accredited under the Government’s CBIL scheme and provide loan decisions typically within 24 hours.

It’s important to remember that when taking a loan, your business is liable for the full loan amount. The CBIL scheme provides a guarantee to the lender, not to the business.

The Coronavirus Business Interruption Loan Scheme (CBILS) is managed by the British Business Bank on behalf of, and with the financial backing of the Secretary of State for Business, Energy and industrial Strategy (BEIS). Full details on CBILS eligibility criteria and the list of participating CBILS lenders can be found on the British Business Bank website.

All information is correct at time of publishing. While we want to help as much as we can, the information and documents found here are provided solely for informational purposes and should not be considered financial or legal advice. To the extent permitted by law, Funding Circle does not accept any liability for any loss or damage which may arise directly or indirectly from the use of, or reliance on, the information contained here. If you have any questions, please speak to your professional adviser or seek independent legal advice.

Date published 15 Jul 2020 | Last updated 22 Jul 2020

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.


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