12 steps to optimise your small business cashflow during Coronavirus

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We want to provide you with positive action to take during the current crisis, so here is the first of our series of Coronavirus recovery blog posts. Times are challenging but there are always opportunities to make small changes that can help. Here, our experts provide their tips on optimising your cash flow to put your business on firmer financial ground.

1 Understand your current cash flow 

If you haven't already, it is time to get to grips with cash flow in your business. Most businesses work on monthly forecasting and management accounts but it may be wise to move that to a weekly, or even daily, basis.
Consult your financial records and work out incomings and outgoings for the past six months. This will help you plan realistically for the next six. Things are likely to be harder going forward (unless you are in a business that works in healthcare, pharmaceuticals or anything else corona-related) so it is good to establish a baseline for cash flow and work on a lower estimate.

2 Be proactive about getting paid

We’re all in this together and need to work in partnership to keep cash flowing right now. Don’t be shy about pursuing payment but be mindful that your debtor may also be trying to balance their books.
Contact people before your invoice becomes due to make sure:
  • it has reached the right person or department

  • there are no issues that will prevent payment

  • that it will be paid by the deadline

This way, if there is an issue with payment, you can start a discussion early. Consider offering people payment by instalment if it will help them meet their payment and keep your cash flow healthy. It is also sometimes worth offering a small discount for early settlement.

3 Delay payments

Wherever possible, try to negotiate a delay to any payments you have to make.  If you are unable to pay your bills on time make sure you let your creditors know as soon as possible - do not bury your head in the sand. They may be able to extend your terms temporarily. 
If you rent premises, one of your main creditors will be your landlord so contact them to see if they are willing to wait longer for your rent payment.
Always try to pay freelancers, microbusinesses and any business-critical suppliers in full and on time. Their cashflow may be more vulnerable than yours and delayed payments could have serious consequences for them or for your business.

4 Reduce your spending

Review and categorise all of your outgoing expenses as:
  1.     Critical

  2.     Discretionary

  3.     Unnecessary

Where you are able to do so (ie won’t face legal action or termination charges):
  • immediately cancel anything unnecessary

  • decide whether to continue anything discretionary

This leaves more money to service critical spending.

5 Take full advantage of financial support

Regardless of whether you currently need it, take full advantage of financial support available. 
Whether that is payment holidays from lenders, SSP refunds from government, or tax and rates relief. This can help increase the distance between you and future financial difficulties.
Check out our regularly updated article on support for businesses during coronavirus. 

6 Speak to your lenders and your bank

If you have existing borrowings with your bank or other lenders get in touch with them as soon as possible to understand what their position is with the Coronavirus situation. Some lenders are giving repayment holidays, eg for 3 months, while we see how this situation plays out.

7 Address personal finance too

Personal finance providers and creditors are expected to be more flexible during the current crisis too. Having more money available to you personally may help with your business.
Speak to your mortgage lender, utilities suppliers etc to find out whether they can offer any help to ease your current financial commitments. 
If you are a ‘vulnerable’ client, let them know. This could mean you are disabled, a carer, or have a small child at home. 

8 Explore additional finance options

There are a range of ways to raise cash for your business, such as working capital loans, invoice financing and revolving credit facilities. Read our article on finance options for more information. 

9 Raise money

While it might not feel like a good time to be raising more money, it may be a good option for your business. If you have existing shareholders, they may be willing to put some more money into your business due to these extenuating circumstances. 
We spoke with one venture capital firm and they have stopped making new investments so that their venture fund can be used to further support their existing investments. 
And, as always, friends and family can be a good option when it comes to raising money for small businesses. It can be uncomfortable but they might be happy to help. As we say in the North East, shy bairns get nowt. It means if you don’t ask, you don’t get!

10 Take time to pay HMRC

All businesses and self-employed people in financial distress, and with outstanding tax liabilities, may be eligible to receive support with their tax affairs through HMRC’s Time To Pay service. 
These arrangements are agreed on a case-by-case basis and are tailored to individual circumstances and liabilities. If you are concerned about being able to pay your tax due to COVID-19, call HMRC’s dedicated helpline on 0800 0159 559.

11 Explore your eligibility for R&D Tax Credits

If you have invested any time and/or money in Research & Development over the last 2 years then you may be entitled to claim some of that back from HMRC, either as a refund or a deduction in your corporation tax.
To find out more and to start an application, please visit our sister company’s website https://rdtaxclaim.co.uk/. Please note that you have to be a limited company to apply for an R&D tax refund.

12 Consider staffing costs

When you’ve built a business from scratch, no-one wants to think about laying off staff. However, staffing is a major expense. 
Consider whether you can make wage reductions rather than redundancies to get through the current uncertainty. Review salary levels, particularly higher salaries, and plan an appropriate reduction.
If redundancies are inevitable, make sure you understand who is business critical and aim to retain them. Plan any communication around this sensitive area extremely carefully.
We hope this article helps you plan and navigate cash flow issues during the current crisis. We’ve consulted financial advisers and the government website to provide accurate information as of 18/03/2020. Please share with any fellow business owners who may benefit. We’re all in this together so let’s share support widely and welcome help from the small business community. 

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