Managing cashflow and cash requirements in challenging times

Given the impact of these very challenging times on businesses and individuals we wanted to share some key thoughts with you around the areas of funding and cash management.

We all know that “cash is king” in the business world – and never has that been truer than now.

We have set out below several key themes and would be delighted to discuss them with you in more detail.

1. Sources of funding

Many businesses will inevitably suffer funding challenges in the coming weeks and months.  Whilst some of these challenges may be met by existing funders it may be appropriate to consider additional funding sources.  There are many potential sources of funding available and we want to ensure that you are aware of the full range of options.  As follows:

  • HMRC – Quarterly VAT payments are going to be automatically deferred by one quarter (i.e. until the end of June ) and businesses will be given until at least the end of the year to pay back these deferred amounts, with businesses also able to contact HMRC to negotiate further time to pay arrangements, if required
  • Coronavirus Job Retention Scheme – Employers can contact HMRC and obtain a grant to cover most [80%] of their employee’s wages [up to £2,500 per month, per employee] for those employees not working if the employer has kept them on. This will cover wages backdated to 1 March 2020 and will run initially for three months with an extension, if required
  • NE LEPs – contribution towards advisory fees
  • Bridging loans
  • North of Tyne Growth Fund – grant funding
  • Regional development funds, such as the Jeremie funds – providing businesses with unsecured loans of £50k+
  • Coronavirus Business Interruption Loan Scheme via British Business Bank
  • Asset Based Lending – providing funding secured against business assets, such as invoice factoring, stock financing, HP etc
  • VCT / Private Equity investment – may be more appropriate for a growth business, that can’t service the repayment of debt

We can help you work out what options are most suitable for you.

2. Managing existing funders

Effective communication with your funders is always important, but particularly so in times of such uncertainty.  You must anticipate any challenges and proactively address them together with your funders to find solutions.  If you approach them in anticipation of problems emerging, this will give your funders confidence that you are in control and prepared.

The main areas are:

  • Reviewing your covenants and making sure that if you think you are going to struggle to  comply at the next reporting date, request a waiver in advance
  • Reviewing forecast cashflows and requesting repayment holidays where you anticipate a cash squeeze
  • Making sure that you are on top of your invoice factoring / discounting options: give yourself as much headroom as you need by ensuring that you don’t wait until debtors are too old to factor against

We can help you prepare cashflow forecasts and provide you with guidance and support in your discussions with your funders.  If they know that you are being assisted by your advisors and accountants on a proactive basis, they are likely to give more credence to your forecasts.

3. Cash management disciplines

A key priority for all businesses at this time should be best practice cash flow management to fiercely preserve and manage the lifeblood of your business.

  • Focus on managing working capital: police payment terms with discipline, invoice any work in progress at the earliest opportunity and engage solicitors early if debtors refuse to pay – a legal letter can make the most recalcitrant debtor reconsider their position quickly.
  • Focus on cost management: cut any discretionary costs at the earliest opportunity and be aware you may need to give several months’ notice under the terms and conditions of contracts.
  • Preparation of both 7 day and 13-week cashflows – with daily updates
  • Plans for ‘what if’ scenarios: although the saying goes that no plan survives engagement with enemy, at least having a view as to what your options are in any given scenario will give you a head start should the worst happen.

Cashflow management is surprisingly simple to do well. It’s all about getting the basics right. We can help you put the processes in place to give you the confidence that you are on top of it.

If you have any questions in relation to the many sources of funding available to you and your business at this difficult time or how best to access such funding, please contact Carl Swansbury or Nick Johnson, Partners in RG’s Corporate Finance Service Line or indeed your usual RG Partner or Contact, as we are all here to help.

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