Posted: Wed 1st Apr 2020
In times of crisis, cashflow dictates whether companies survive. Business owners are working hard to ensure they have the cash needed to keep running, so we've shared the key steps to developing a plan.
Watch the video at the top of this post to hear Business Doctors co-founder Matt Levington share his advice or read the summary below.
The first step is to look at the money going out of the business.
"Your first priority is cash preservation," said Matt. "Right now you need to stop paying everyone. There are some exceptions to that, but you need to take a look at the flow of cash out of the business and prioritise payment."
It's important to communicate with suppliers, such as landlords. Be firm about payment if you're unable to generate income.
"You need to tell them you can't pay them but that you will eventually," Matt added.
Most lenders are offering payment holidays of at least three-months, so speak to your bank.
Check your suppliers and think about who might be able to give you better terms. Larger companies appreciate the situation small businesses are facing and are likely to give you extended credit terms.
You can delay any VAT payments due between 20 March and 30 June 2020. If you choose to defer a VAT payment, you will have until 31 March 2021 to pay it.
You do not need to tell HMRC that you are deferring your VAT payment but if you normally pay by direct debit, you should contact your bank to cancel your direct debit, or you can cancel online if you're registered for online banking. More information here.
Other types of taxes can be deferred too:
If you've filed your Self Assessment tax bill and owe less than £10,000 you might be able to arrange to pay in instalments online
Check whether you're entitled to a business rates holiday
Matt advises business owners to think about how they can grow their business with existing customers.
"These are the people that are already loyal to us and like us. They believe in what you're doing. These are the ones you need to open a dialogue with and see how you can help and support them," he said.
It's possible that they need additional services because they're in a sector that's in high demand. Think about opportunities to change your proposition slightly. What can you do through digital platforms?
When you've worked through these steps and other ways to support your business, it's important to take time to write down your plan.
"When you've done all this work, you need to put it into some kind of short-term plan with cashflow attached to it. But that's easier said than done when you're looking after your customers and your staff," said Matt.
Having a plan is important if you're going to raise finance. Banks need a coherent story when you're applying for schemes like Coronavirus Business Interruption Loan Scheme. Demonstrate how you're going to start growing at the end of this.