With the rising impact of COVID-19 being seen worldwide, all industries will face significant disruption to their supply chain, workforce and cashflow.
The right response will depend on the specific circumstances you and your business face. However, when experiencing significant stress or distress, we recommend you focus everything you do around the management of cash.
1. Cash management: the most critical issue for businesses
Take steps to retain cash in the business This may include actions to:
- stretch creditor payments
- negotiate payment deferrals with landlords and banks where possible
- sweep idle cash from other facilities into your working capital account, or draw down on availability in your banking facilities
- negotiate with customers for them to pay early, by offering them a discount or other concessions
- explore tax concessions available
- Investigate available government grants and other support
Short to medium term cash forecasting is essential
Now more than ever you should create a robust cash forecast. The minimum expectation for most businesses should be a 12-14 week daily (or even weekly) forecast, monthly after that to the end of 2020. Profit & loss and cash flow should be integrated and cash balances reconciled.
Stakeholders who are contemplating providing financial assistance will not be able to support everyone to the same level. Having a robust plan underpinned by strong financial forecast will give comfort and clarity to the stakeholder, thereby maximising your opportunity to access the necessary funding.