Manage your cash flow in a post-COVID climate

1 September 2020
how to manage cashflow

Importance of Cash Flow

Cash flow is at the heart of any successful business. Even in normal times, it is a huge concern for most, but more recently, it has become even more challenging as a result of the coronavirus pandemic.

In most cases, the Government’s intervention and support schemes have helped to stabilise small businesses and give them more time to plan and react. But as they come to an end, the question on many business owners’ minds is what do they do next? There is still a lot of uncertainty around how financial support will transition, how lenders will support businesses long-term, what consumer demand will be like, and how the economy as a whole will recover. Many economists agree there will be a bounce back, but they all believe it will be sometime before we get back to pre-COVID-19 levels of activity.

In such uncertain times, how can small businesses protect their futures and safeguard the millions of jobs in their sector? There is no straightforward answer to this, however, understanding and effectively managing your cashflow is a good starting point for most. If you want to learn how to protect your business and manage your cash flow in a post-COVID climate, read our following guide.

 

Cash flow illustration with laptop, money and graph chart

 

Understand how your business is performing

You need to make sure you can track the performance of your business. Now, more than ever, it is important to understand how your business is performing and responding. By regularly monitoring your finances, you are much more likely to spot potential problems, risks, and opportunities, and react quickly to them. This will also help you to understand trends and changes in your business, which can help support the forecasting of your future finances.

To make sure you are getting the information you need, you should review your bookkeeping and reporting systems to ensure they are up to scratch. This doesn’t mean you need to invest in expensive software or reporting tools. An accountant, such as Maple, will be able to find cloud-based bookkeeping that works for you. We can talk you through the different ways cloud accounting can provide you with all the financial information you need, transfer you to new software, and provide you with automated expense tracking software.

 

Review your costs

This may sound obvious, but consider reviewing your ongoing costs to see if there is anywhere you can cutback. In most businesses, staff costs are likely the single biggest expense. Furloughing staff is now well established and it is likely you have already done this if you needed to, but bear in mind the changes to the furlough scheme coming in the next few months. In September, employees will be asked to pay 10% of employee wages, with taxpayers paying the remaining 70%. In October, the final month of the furlough scheme, employers will be asked to pay 20%, with the remaining 60% covered by taxpayers.

Flexible furlough options are now also available, so businesses can bring employees back to work for any period of time and on any shift pattern required. Wages earnt during the working hours will be paid for by the employer, but the remainder of the monthly wages will continue to be paid by the Government.

Other costs could be worth reviewing too in order to understand what steps need to be taken to manage your cash flow in a post-COVID climate. Some costs may be fixed or contractual, or relate to key services, so cannot be reduced, but others may be more discretionary and stopped without impacting your business.

 

Businessman reviewing costs with a calculator and graphs

 

Protect and predict future income

Many businesses have reported significant falls in income during the coronavirus crisis, and are understandably worried about the uncertainty surrounding future sales. In many cases, looking ahead and projecting figures based on your previous income levels will not provide you with a relevant view, as buying patterns have quickly changed.

Instead, look at ways to protect your income, and try to understand how it may change. Contact key customers to see if you can understand their plans for the future, and any changes they may have in their buying habits. You could also consider recurring payments for future work or payment plans for outstanding amounts to give some certainty over future cashflow.

It is also worth considering how your business could diversify to develop new sources of income. There has been a lot of innovation in several sectors during the pandemic, with businesses finding ways to access new customers online, or tapping into new markets. By protecting elements of your income, you can start to track new trends, which will help you to more accurately predict what may happen in the future.

 

Cashflow forecasting

You will be able to better understand where you are if you have good reporting in place, and if you’ve reviewed income and costs this should help you to start looking ahead. A cashflow forecast doesn’t have to be complicated, they should reflect the size and complexity of your business but are invaluable for most business owners. Cashflow forecasts help you to track short term cash needs, and monitor this against your available working capital. They are also great for helping you to better understand how your business may change as we go forward in these uncertain times, and can support decision making. All of which are essential qualities in determining how to manage your cash flow in a post-COVID climate.

It’s worth mentioning that many businesses have taken on new debt because of the Covid-19 crisis. This could be in the form of government loans, vendor loans, deferral of VAT payments, or other funding, all of which will need to be repaid eventually. Forecasting can help you to understand how you can manage to pay back these debts alongside your day to day business costs.

Cashflow forecasting is never an exact science, and won’t always be perfect as assumptions are involved, but now especially, its incredibly important business owners look forwards. Maple Accountancy can help you with your cashflow forecasting and set up a suitable cashflow model that works for your business to help you plan for the future.

 

Cash flow forecast

 

Access the support and funding available to you

The various Government support packages have been up and running for a while now, and funders continue to provide access to Coronavirus loan schemes. You have likely already accessed the funding you need, but it’s useful to keep track of Government announcements in case of any new developments and continue to review the need for additional funding. Some loan schemes will be available for at least another couple of months and could provide you and your business with an extra boost of cash that is needed to help keep your business afloat if you have not yet applied.

 

Continually review the position

It’s important you keep reviewing your position. There have been huge changes in recent months, and we still have a long way to go before we are back to normal. Make sure you review your financial position regularly and look at your financial reports. As we have mentioned above, cashflow forecasts are incredibly valuable in times such as these but they need to be kept up to date, so it’s worth regularly updating them to reflect the latest figures and document any key changes to your business.

 

Group of business workers reviewing their cash flow

 

How Maple Accountancy can help

Still anxious over how to manage your cash flow in a post-COVID climate? If your business needs financial guidance and support through the coronavirus crisis and beyond, Maple Accountancy can help. We are a team of expert business advisors and accountants who have many years’ experience helping businesses of all sizes, from a range of sectors, with their finances. We can provide a wide range of financing and accounting support services to businesses to help them manage their cashflow in a post-COVID-19 climate. Contact us today on 01332 207336 or success@maple.uk.com to arrange a free no-obligation consultation with one of our friendly advisors.

Maple Accountancy is a firm of expert Business Advisors offering accountancy services, tax and business advice to owner-managed and family-owned businesses.

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