UHY Hacker Young | Chartered Accountants

Gaining control over your cashflow

17 March 2020

The biggest impact your business will face will be a reduction in cash flow, therefore you need to take action now to mitigate the possible impact.

Understand your position

How much cash do you have in your bank account(s)?

Based on current cash balances, how long can you survive with no income but the same level of outgoings?

We are in unprecedented times with little to no idea when normality will resume. Anything less than five months’ worth of available cash should therefore warrant immediate action.

Turn invoices into cash quicker

  • Make sure all work in progress has been converted into a sales invoice and delivered to your client. Where possible, send out invoices early.
  • Consider adjusting your payment terms to reduce the number of days a customer is required to pay by.
  • Where possible, take payment up front. This can be done over the phone through payment terminals or by linking ‘pay now’ facilities to electronic emails.
  • Chase overdue invoices!

Don’t lose vital cash too soon

  • Assess the need of any stock purchases before placing an order. The likelihood is that customer numbers will be lower over the next few months and as such, you will not need the same level of stock as last year.
  • Ensure that where you have a credit facility or payment terms with suppliers, that you maximise this. For example, if you have a 30-day payment term, ensure that payment is made on day 30 and not day one.
  • For general office expenditure, hold off on purchases unless absolutely necessary. If you need to buy equipment or consumables (i.e. stationary), only buy what you need.
  • Where possible, make purchases on a credit card and maximise repayment days. Please note that if you are using a credit card, try to pay in full by the due date to avoid interest amounts being applied.
  • Ensure that any employee overtime is restricted. Employees might have more time on their hands in the next week or two and therefore overtime tasks could be done then.
  • Hold back on hiring any new members of staff. This will save on recruitment fees and also avoid increased employment costs in periods where sales are low.
  • Approach suppliers and landlords to see if you can negotiate longer payment terms or potentially payment holidays until trading activities increase.
  • If you are due to pay tax liabilities to HMRC, it may be possible to negotiate time to pay arrangements through their dedicated Coronavirus Helpline.
  • Consider financing options and disposing of surplus assets.

Keep on top of your situation

Model various scenarios now with different levels of severity. This will allow you to make quick and informed decisions depending on how the next few months play out.

For example, a 100% / 50% / 25% drop in sales, loss of key employees, increase of supplier costs.

Once you have mapped out scenarios, monitor your cash flow each day to ensure you are on top of the situation as best you can be.

We are all in this together and are here to support if and when you need us.

For more information please speak to Chris Oxley on 0161 236 6936 or via email on c.oxley@uhy-uk.com