Covid19: Overcoming the Challenges to Embrace the New Normal
The impact from the Coronavirus has been far-reaching and over the past few weeks has changed the way we live for the past few weeks, no matter where you are in the world. In the UK, the last few weeks have most definitely been a challenge for most, if not all, businesses.
The Chancellor has been keen to point out that he is doing everything he can to limit the number of business failures during this period of uncertainty. From providing the opportunity for businesses to furlough workers and receive a grant for their wages from the Government to agreeing deferrals, payment holidays, and providing cash for loans and grants. It does feel like there has been an attempt to support businesses, all for a period of at least three months. At the same time, the Chancellor has told us that there will be dark days ahead.
Starting Back Up Again
The Government are keen to start the economy moving again although the lockdown is set to continue until at least 7 May 2020. Most businesses have focused on their immediate cash requirements over the last few weeks, using short term cash flow forecasts to understand the actual cash coming in and what is going out. Using these forecasts as a base, businesses should now be starting to look at what the next few months will look like. We look at some actions that you can take below:
1. Speak to Your Existing Customer Base
Speaking to your customers will help you to understand what their challenges are, what their immediate/short-term needs look like and will help you to assess their ability to pay you going forwards. There may need to be some adjustments to orders received based on how they envisage demand after the lockdown comes to an end.
2. Turning Work in Progress into Cash
Whether you are a professional services firm or a manufacturing business, reviewing your work in progress will help you to understand whether you have the ability to complete any of your existing work in progress without the need for additional purchases or input. Concentrating some of your initial efforts on turning work in progress into cash will assist you with your working capital cycle.
3. Identify What Additional Purchases You Need
Carrying out a review of your work in progress will also help you identify what purchases you need to make in order to complete your existing orders. Where you have outstanding payments to suppliers, talking to them about the orders that you have received and cashflow will help you to work with your suppliers to get moving again.
4. Book Your Haulage in Advance
If you use an outsourced logistics or distribution operation, make sure that you have booked your haulage in advance so that any delays in getting finished products out to your customers are minimised.
5. Reviewing Your Supply Chain
This is a good opportunity to speak to suppliers and understand what their challenges are. Building relationships with your suppliers will go a good way to helping you to move forward – if you have communicated with them with regards to your challenges, the chances are they will be more amenable to being flexible on payment terms in the short term.
6. Consider What the Return to Work Looks Like for Your Employees
Where you have furloughed staff, take some time to think about whether a return to work needs to be phased or shift patterns need to be changed if social distancing rules are set to continue. Where working patterns need to be changed, make sure you seek advice from your employment advisors.
Looking Further Ahead
The position now may seem
relatively stable, but the VAT, tax and loan payments which have been deferred
will all need to be paid back at some point. Making sure you have enough cash in
the future months to meet these obligations will be vital if your business is
to exit this period relatively unscathed. Cash will be tight whilst the working
capital cycle builds up again and there is likely to be some flex needed with
payment terms. Starting to prepare a longer-term cashflow forecast will help
you to understand what additional funding requirements you may need, and in
what form.
Many businesses are likely to need some additional help as they start back up
again. Even businesses which have been going for many years will likely need to
treat their business as a start-up for the next few months. Taking action now
will ensure that the dark days ahead will end sooner rather than later. If you
are concerned about what the future holds for your business or need some advice
about what steps you should be taking next, please get in touch with our team
who will be able to help you.
