Right now, people are spending much less than they usually do. Everyone is wondering if their job is safe and how their household will get through this time. As such, for businesses – cashflow is becoming an issue. Here at JDA we know that during a time like this cash is king, so part 2 of our Pandemic Protection Plan focuses on cashflow.

You can watch the video, or read more below.

The first step is to make sure you’re set up to survive the next few months. Many businesses won’t, so make sure you are not one of them. For many of us, it will be hard but there is support out there.

Most of this section involves looking at your finances. Cash really will be king in the next few months. Many of the businesses that fail will have been profitable, and could be again afterwards, but will simply run out of cash.

I know I’m biased, but your accountant really should be one of your main pillars to support and advise you through this.

Cash is king over the next few months. There’ll be plenty of sales when this is over but what about right now?

Budget

First – create a budget plan. List all your outgoings for each month during the lockdown. This will make you more aware of where your money is going each month.

You can decide what is most important from this and prioritise your most important bills first.

Could anything be cancelled? Does your office still need its monthly supplies? Some won’t be needed while you’re working remotely. How about those software or training subscriptions? I know I’m a sucker for signing up for things and then never using them – now’s a time to get cancelling anything that isn’t going to help you through this.

And do the same for your homelife. If you’re not allowed out, do you need that gym membership or cinema pass? What else can you cut? Sky Sports while there’s no sport?!?

Create a cashflow

Using the above, and your expected sales, create a cashflow for the next 3-6 months.

This can be really simple – you just need your income and your expenditure month-by-month in a spreadsheet. If you want to use software, that’s great – for example FLOW is a good free cashflow that links to Xero and QuickBooks. However, a simple spreadsheet will do just fine.

When you’ve done this, are there any pinch points where you run out of cash?

Use your cashflow calculations to figure out how long the business could survive in the worst-case scenario – no money coming in at all. 

And think about the staff – do you need all of them if there are less sales and customers? Or if your business has to close? There’s some Government support to pay them while they’re off (and I’ll explain that in the next section), so don’t be emotional – be realistic and decide what the business really needs to survive.

Get the cash in

To help immediately, get as much cash in from your debtors as possible. Do remember that they might be struggling too – relationships will be vital on the other side of this. But ask for payments to be made for all outstanding invoices.

And, can you get deposits for future work? 

Speak to your suppliers

The government have asked commercial landlords to be more lenient during the lockdown period – they can’t legally evict anyone in the next three months. Rent is often a large cost that will take up a chunk of your budget. So, if you’re struggling, work out alternative arrangements – they are more likely to understand than you think.

Suppliers are likely to be more understanding as well. The supply chain is suffering, and many consider it now a race to keep customers until this has blown past us. They are going to want to keep your trust for when trade picks back up again – ask if you can have a little bit more time to pay your invoices.

I hope you found that useful – in the next step, we’ll get on to the financial support available from the Government for you and your business.

See you then…

You can also watch part 2 of our Pandemic Protection Plan here.

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Any questions?

If you’d like a meeting or a Skype call to discuss this, please get in touch with your favourite Liverpool accountant