‘Cash is king’ is often the mantra for small businesses, and cashflow has never been more critical than now.

The reality is that most companies are going to see an immediate decrease in sales opportunities as customers focus on issues in their own business. This means that purchasing decisions will inevitably be delayed or cancelled.

Minimising outgoings should be a priority for businesses as cash inflows are likely to dry up temporarily. This involves making difficult decisions on costs, staff and projects. There can be no sacred cows in these scenarios. However, there could be some quick wins, particularly with the support that the government is providing

Some key suggestions to manage cash flow include: 

  •       Delaying VAT and PAYE/NI payments in line with government guidelines
  •       Applying for a 12-month business rates holiday (if in an eligible sector). 
  •       Offering sales discounts 
  •       Chasing debtors (offer incentives for early payment)
  •       Delaying payments to creditors where possible
  •       Freezing capital expenditure
  •       Cancelling all non-essential spending
  •       Putting a hold on staff recruitment
  •       Speaking to the landlord about rent deferral

Linked to the subject of cash flow is funding, and whether the business can secure new or further support through this period. The start point should be to speak to your existing bank, lenders and investors. Bear in mind; the government is also providing support to SMEs through the Coronavirus Business Interruption Loan Scheme (CBILS). This is accessed through many mainstream lenders and a broad range of other institutions; a full list of which can be found on the British Business Bank website.

All funding providers will still claim to be open for business. And while this may be largely true, companies should focus their efforts on the most likely sources. For example, existing lenders and investors will be more likely to support a company that they already have a financial interest in. 

Government-backed schemes should be a good source of funding at this time. For example, the criteria for the CBILS scheme has been set to enable lenders to fund businesses that may not meet metrics currently but can demonstrate sustainability over the medium to long term. 

Even in challenging times, investors, whether that be venture capital firms or business angels, will continue to invest in opportunities with good prospects over the long term. Albeit, they may be more selective with sector preferences. However, more so than ever, companies must be realistic about the valuation of their own business when engaging in such discussions.

In terms of operations, a detailed review of staffing levels should be undertaken across the entire business, identifying which roles are absolutely key to the ongoing viability of the company and those less so. Keeping the business alive has to be the priority, first and foremost. Followed by maintaining a suitable level of operational capability to continue to trade. In some situations, difficult decisions will inevitably need to be taken with regards to reducing staff. In this case, businesses should explore the Government's Job Retention Scheme, whereby staff can be furloughed with 80% salary (up to £2,500 per month) paid via an HMRC grant. Although, be mindful that this will represent a change to staff employment terms and contracts, so seeking appropriate legal advice is key if implementing this scheme. The benefit of this scheme is retained employees and therefore the ability to return to normal operations quickly, following the crisis. 

Communication and Staff Wellbeing is also key. All businesses should recognise that this is an unusual situation for all members of the team. Many will struggle with operating in isolation and are likely to be fearful of their futures. Being considerate of everyone's mental health is essential, especially as all businesses will want as many of their existing team to return to work as usual once the crisis is over.

The importance of maintaining clear lines of open and transparent communication across all levels of the business cannot be overemphasised. Look to holding regular team meetings and one-to-ones virtually.

Note that communication should not all be work-related. Numerous businesses are operating virtual happy hours on a Friday evening. Additionally, they're setting up challenges for people to undertake in their break times which is all great for morale and the wellbeing of staff - something we should all take responsibility for in these difficult times – we are all in this together.

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