Preserve Your Cash Flow And Survive COVID-19
It is often said in business that cash is king. In fact, the reason most businesses fail is not actually lack of profits but rather lack of cash flow.
And as businesses grapple with the impact of Coronavirus, the message that cash is king has never been more important.
Until you now you may have measured any number of things in your business. Sales figures, gross margin, net profit – but right now, the ONLY thing that matters is CASH.
Focus on cash flow.
If you have not already, you should look for every opportunity in your business and at home to preserve your cash reserves as much as possible.
And when I say, “as much as possible,” I don’t mean as much as you can without going to too much effort! I mean as much as humanly possible!
Winning against Coronavirus is not simply about getting to the end of lock down but about having sufficient cash reserves AFTER lock down to get going again.
Some tips to preserve cash and improve cash flow:
- Maximise incoming cash
- Defer outgoings and projects
- Furlough staff and claim under the Job Retention Scheme
- Claim grants from local authority (if you qualify)
- Analyse your outgoings
- Eliminate all outgoings that are not absolutely essential
- Be brutal and ruthless when assessing your outgoings
- Don’t delay cutting your outgoings. Do it quickly
- Try to agree longer payment terms with suppliers
- Negotiate a rent free period if you pay rent
- Defer VAT payments until 31st March 2021
- Use the HMRC “Time To Pay” scheme for PAYE and Corporation Tax
- Try negotiating temporarily cheaper rates with suppliers
- Claim business rates reduction (for retail, leisure, etc)
- Cut costs at home to reduce your draw on the business
- Ask your mortgage lender at home for the 3 months’ repayment holiday
When you’re trying to preserve cash, every penny counts – and you will be surprised at how a number of small savings will all add up and make a difference.
According to Prof Chris Whitty’s comments yesterday, social distancing could be with us until the end of 2020 and this could well mean that multiple lock downs come and go.
So as you strive to preserve your cash reserves (or to stop your overdraft increasing), keep in view that preserving your cash is potentially something you’ll need to do for many months to come.
Written 23.04.2020 by
Antony Holdsworth BSc (Hons) FCMA CGMA