Managing Cash flow post COVID

Managing Cash flow post COVID

Many business owners have turned to the government during the past 18 months for financial support to subsidise them through the pandemic. However now is the time to begin planning how you’ll maintain a healthy cash flow and fund your business whilst you begin to bring your business back to great financial health.

With furlough having ended on the 30^th September, VAT deferrals being paid, the paying back of government loans and some companies not reaching pre COVID trading levels, some businesses may struggle with cashflow now and in the coming months.

But there are things you can do to manage and ease cashflow in the coming months.

 

Cash flow forecasting

Cashflow forecasting can often be hard to do, but in times of uncertainty it can feel near impossible. Speak to your accountant, take advice, and be prepared to adopt new ways of forecasting cashflow. When it comes to forecasting it is important that you use facts rather than letting emotion lead and revisit regularly to take constant change into account. Acting now and creating an action plan and cashflow forecast will ensure that you’re positioning your business for the future.

 

Focus on invoicing & credit control

Focus on your invoicing, debtors, and credit control during this time. Make sure you invoice regularly, have strict payment terms and a good follow up process to ensure you control your debtors.

 

Revisit your costs

Look at your fixed costs and consider if you can minimise these in the coming months (without adversely affecting business now or in the future).

Consider swapping some of your fixed costs for variable costs, but ensure you preserve your core business. For example selling assets and then leasing them back is an option to raise emergency cash.

Reducing your variable costs can also be a quicker way to immediately reduce your cash out, rather than focusing on your fixed costs.

 

Paying back bounce back loans

The Chancellor’s Pay as You Grow repayment flexibilities include the option to delay all repayments, meaning businesses can choose to make no payments on their loans until 18 months after they originally took them out.

Pay as You Grow enables you to extend the length of your loan repayments from six to ten years (reducing monthly repayments by almost half) and it allows you to make interest-only payments for six months. The government’s aim is to allow you to tailor your repayment plan to your circumstances.

This is in addition to the government covering the costs of interest for the first year of the loan.

So, to summarise the options available to you:

1. Extend the length of the loan from six years to ten
2. Make interest-only payments for six months, with the option to use this up to three times throughout the loan
3. Pause repayments entirely for up to six months

 

The recovery loan scheme

Launched on 6 April 2021, the Recovery Loan Scheme (RLS) provides financial support to businesses across the UK as they recover and grow following the pandemic.

If your business was affected by Covid, you can apply to the scheme and you can use the finance for any legitimate business purpose – including managing cashflow or investment and growth.

However, you need to be able to afford to take out this additional debt finance for these purposes.

If you already borrowed from any of the other coronavirus loan schemes including The Bounce Back Loan Scheme (BBLS), The Coronavirus Business Interruption Loan Scheme (CBILS) or The Coronavirus Large Business Interruption Loan Scheme (CLBILS), the Recovery Loan Scheme (RLS) is still available to you. However, be aware that the amount you’ve borrowed under previous schemes may limit the amount you borrow under RLS.

The Recovery Loan Scheme will run until 31 December 2021 (but is subject to review).

The scheme is available through several lenders accredited by the British Business Bank.

You can find out more about RLS here.

 

Business loans

The aim of the Recovery Loan Scheme is to improve the terms on offer to you for additional funding. However, some lenders may offer you a commercial loan on better terms, so it’s worth looking at all options. Approach your own lender/finance provider first.

 

Time to Pay Arrangements with HMRC

Keep an eye on your business tax account (or speak to your accountant) to keep up to date with your tax liabilities and payments. If you will struggle to pay your tax bill, then you might be able to set up a Time to Pay Arrangement with HMRC. This lets you spread the cost of your tax bill by paying what you owe in instalments.

 

Things are still not straightforward right now for many companies when it comes to cashflow and funding. But you need to build in cashflow forecasting, management and future financing into your overall post COVID planning.

The government and lenders are still there to help you and your business recover, but keeping in contact with your accountant, spending more time on your figures and getting your business on track and making healthy profits now and in the future is key to your business success.

Contact us at our offices in Wirral, Liverpool and Chester if you need more help and advice on managing your cashflow and funding for your business now and in the future.