We have set out some practical guidance on priority areas to focus upon in your business and stress that taking early independent professional advice could make a significant difference to your prospects for business survival.
Cash was, is and always will be king. Businesses should be preparing short-term cash flow and trading forecasts (typically 13 weeks if not shorter) and continuously refreshing these in light of scenario outcomes, trading performance and cash generation measures. Short-term management of a Company’s cash position is crucial to identify critical points of pressure, monitoring the unlocking of working capital and the timely implementation of mitigation strategies.
2.Focus on costs
Management should identify business-critical costs and expenditure and, where possible, aim to proactively reduce or defer such costs. The fundamental change in the current business environment may allow for certain cost-saving opportunities to emerge while discretionary spend should be considered carefully. Businesses should also be mindful of the need for business-critical capital expenditure and finance opportunities.
Alighted with cash management, businesses should seek to maximise cash collection opportunities. This could include implementing enhanced and robust credit control practices and targeting those customers who typically are slow payers. Consideration should be given to strategies, such as offering early settlement discounts or negotiating acceptable repayment plans.
At this crucial juncture and where resources are particularly tight, businesses should be focusing on their more profitable and cash generative customer base. Engaging with customers and actively monitoring their financial positions may necessitate early action or result in opportunities, including reduced credit terms or pro forma supply.
Companies should be mindful of their key business-critical suppliers. Inevitably these suppliers may also be under undue strain and financial distress and contingency strategies should be developed to minimise any potential disruption to the supply chain. Businesses should ensure the contingency plans of their key suppliers are themselves robust and not be overly reliant on a single supplier. An alternative supplier may present new opportunities for the business.
Linked closely with supplier support, businesses should be actively engaging with its creditors, including its finance providers. Open and transparent communication is crucial to successfully negotiate support measures such as extended credit terms, short-term repayment holidays or access to new or alternative finance. In particular, opportunities to materially reduce cash outflows should be considered using the unique Government support measures relating to tax liabilities, business rates holidays and rent forbearance.
7.Non-critical business assets
Where resources are tight and a business owns assets which are either under-utilised or are not considered to be critical, these assets could be leveraged to generate cash for the business. Consideration should be given to either refinancing certain assets or a disposal to alleviate short-term cash flow pressure.