Cashflow planning in the post-lockdown era

Anglo European hosted a dedicated Covid-19 webinar offering guidance and support to its customers on how to manage cashflow and plan for their businesses as industry moves out of lockdown.

Jointly hosted with its investor partner Octopus Investments, and chartered accountancy practice Wilson Partners, the webinar held on May 14 was led by Wilson Partner’s Ross Wilson.

He said studies revealed that the vast majority of companies across sectors (70%) had taken advantage of government schemes, and that as the industry came back to work, it was vital that companies were tuned into the support available.

Ross also argued that businesses needed to embrace fundamental market change.

“We have seen some amazing examples of businesses which have and are embracing change,” he said.

“We are moving to a ‘new normal’ and, understanding how the market might shift going forward, you maximise the opportunities for your business, and with that not only your chances of survival but future growth.

“You need to be ahead of the curve.”

He outlined a series of actions that window and door companies should be taking now, as well as the importance of medium and longer term planning, especially those actions which supported cashflow.

Ross’s tips for steering your business finances through Covid-19:

1. Cash flow forecasting

“If a cash crisis is likely to happen, it becomes that much easier to work backwards and establish how pressure might be taken off your cash flow by planning and acting to mitigate its impact,” Ross said.

2. Stay close to your customers

One of the things that you should be thinking about is gaining as much information and knowledge from your customers about how they are finding things as this might in turn allow you to plan your business’s future.

3. Information is power

Ensure that your management information including your profit and loss accounts and balance sheets are up to date. This will give you a clear understanding of the reserves that you may have to rely on for the foreseeable future.

Which of your customers are the most profitable and should be your priority going forward?

“Now is a good time to have those further drill downs and to think about not merely overall profitability but the profitability within various cost and profit centres in your business,” Ross said.

4. Access financial support

  • Coronavirus Job Retention Scheme

The Coronavirus Job Retention Scheme can be applied for any employee in post on March 19 2020, and who hasn’t been working because of lockdown. Employers can claim an online grant of 80% of their furloughed employees’ salaries up to a maximum of £2,500/month.

The HMRC application portal is here.

  • Apply for grant funding schemes

The government has announced support through local authorities for small businesses through the Small Business Grant Fund. If you think you qualify and haven’t received a letter already, contact your local council.

  • VAT deferral

UK VAT registered businesses with a VAT payment date due between March 20 2020 and June 30 2020 have the option to defer the payment until a later date. HMRC will not charge interest or penalties on any amount deferred. Many businesses have taken advantage of the deferral and cancelled their direct debit with HMRC.

“Our view would be that if you have the opportunity to defer the liability until March 31 2021, then you should take it. Being in control of cash is important and if you need to put it into a separate account and ring fence it, then that’s something which you might want to consider”, Ross said.

  • Self-assessment tax deferral

The next deadline for self-assessment tax is July 1 for your second payment on account. You can delay making payment and you will have until January 31 2021 to pay it.

  • Coronavirus Business Interruption Loans

UK based small and medium sized businesses can apply for a loan of up to £5 million. This is interest free for the first 12 months. The process requires past, current and future financial information including projections.

“Some businesses are accessing the funds and using it to pay off other funding in their business which has personal guarantees attached to it and even for opportunistic activity such as acquisitions,” Ross said.

  • Small Business Bounce Back Loans

Available to small businesses, bounce back loans are fully backed by government, with up to £50,000 available to qualifying small businesses as part of a fast track finance scheme.

  • Innovation funding

The government is making a £500 million loan scheme available to high growth companies through the Future Fund. A further 750 million of targeted support is being made available to SMEs to support research and development.

5. Business Plan

This is not time for a 75-page business plan but something that is very short, concise and to the point. Although you should be focused on the short-term, you should not lose sight of the medium to longer term.

“Think about how your market might be changing how relationships with your customers and supply chain may need to change with it as you move forward,” Ross said.

“What is encouraging is that companies including Anglo, are already shifting direction moving from the short-term to thinking medium to longer term about the future direction of their businesses.”