Coronavirus cash flow management

The coronavirus pandemic has led to significant uncertainty for British businesses, with management teams facing scenarios outside the perimeters of their experience and contingency planning. Due to the countrywide lockdown and consequent economic activity many businesses will see minimal sales over the next three months.

Hence, in many cases the only known for management teams is the current cash position of the business. Noting many businesses will effectively be mothballed for the next three months with many of their employees furloughed it is important that businesses manage their cash to ensure they are in a position to re-commence trading when normal life and business resumes.

We have summarised some key points in managing cash flow:

  • prepare a simplistic daily 12-week cash flow, illustrating receipts and payments;
  • this can be prepared rapidly in an excel worksheet or similar programmes;
  • identify the key payments during the period and identify critical and non-critical payments; and
  • quantify the amounts and timing of any payments.

After the preparation of a first draft of a cash flow it should be possible to rapidly identify the cash burn during the moth-balling period and the potential implications for a business. Upon reviewing the cash flow management teams may be able to manage/improve the cash flow via:

  • accessing government reliefs;
  • deferring supplier payments;
  • agreeing compromises with creditors; 
  • reducing/ ceasing non-critical expenditure; and
  • cancelling/ managing direct debits and standing orders.

By fully understanding their cash flow it ensure businesses will have a good understanding of their available options and will be an important tool in supporting any funding application to the Government backed Government loan scheme (CBILS).

For assistance in managing these processes, please contact

Damian Webb Damian Webb

Partner

Allan Kelly Allan Kelly

Partner