Foxley Kingham

Foxley Kingham Medical


Cashflow management and the importance of financial information as support is withdrawn

The various Government support businesses have relied upon during the pandemic, in the form of Coronavirus Job Retention, Furlough Scheme, Bounce Back and Coronavirus Business Interruption Loans (CBILS) is now being withdrawn, with loans starting to be repaid and the Furlough Scheme ending in September 2021.

A lifeline for many businesses, the Covid-19 support measures have provided cash boosts that businesses must now survive without. But as these measures start to be withdrawn, businesses enter a new phase of not only operating in a still-uncertain market where restrictions are not yet fully lifted, but, without the cushion of Government support.

So, what can businesses do to continue to safeguard their survival and withstand the extra pressure on their cashflow? ProActivity spoke to Crystal Boston, Director at Foxley Kingham, about the importance of cashflow management for businesses and negotiating the tricky landscape of Covid-19 support withdrawal.

“We would urge businesses to focus on analysing cashflow. The Government support has been crucial throughout a difficult year of trading, but businesses need to ensure they can survive without it. Our advice is to get those early cashflow projections to enable the planning of liabilities and to ensure revenues are in alignment as much as possible.”

Crystal explains the approach businesses can take to get ahead with their cashflow now, and why it’s so critical.

“Businesses should not wait until the banks are asking for money and furlough is gone. Focus now on what the future looks like by organising clear financial information and records. Now is the opportunity to forward plan.”

Businesses have had a turbulent time over the last year, adapting in order to survive. Many could be forgiven for being overwhelmed by the challenges still to come. Crystal comments,

“Yes, it has been a tough time and businesses have put their energy into firefighting. But the focus needs to be on the long view now, instead of what to do next week.”

So, what can businesses do to get ahead? Crystal added.

“It’s basic stuff. Focus on setting up those bank feeds to your cloud accounting, setting up recurring entries and keeping scanning up to date. If time and resource is given to keeping records accurate and robust, we can see where the pinch-points are and put the right measures in place to mitigate.”

What might those measures be? And what can businesses do to improve their cashflow, if there are ‘pinch-points’? Surely if cash has to be repaid, it simply has to be repaid, affecting some businesses’ ability to trade?

“We would always advise opening up the lines of communication with HMRC, with the banks and suppliers. They are open to negotiating payment terms, so assess business outgoings to see what can be afforded. But, also, look at the business’s costs. Do you need the premises you once had? Overheads are usually fixed and a huge drain on resource. Could some of your staff work from home or hot desk on a permanent basis?”

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With the Furlough Scheme ending in September, there will be a focus for many businesses on employees. Crystal agrees and has this advice: “Recruitment of staff is costly. While it is pressing that businesses consider which staff they may want to let go as furlough ends, consider instead where those staff may best be utilised elsewhere in the business. Good staff members are valuable and may be able to help push the business in a new direction. Again, it’s about communication. Talk to staff and be open with them. Ask them how they think the business could be improved.”

It’s often the case that those doing the day-to-day can see potential solutions and opportunities for a business, as well as know what customers are looking for.

“Exactly that,” says Crystal. “Talk to staff about ideas they may have for the business. Talk to customers too. Often solutions can be beneficial to both parties. If there’s a problem caused by having customers on 90 days payment terms, negotiate interim payments. This may actually suit them better. It’s about communicating with all parties.”

“We’ve seen many businesses successfully adapt to push into different markets, adjusting their model accordingly, and continuing to think differently and innovatively.”

It’s heartening that Crystal has seen many businesses adapt so successfully over the last year. This bodes well for continued innovation of businesses and a market ability to adapt during the reduction of Government support.

“Certainly, it can still seem overwhelming,” says Crystal. “But focusing on the financials and forward-planning are key right now to keeping the cashflow healthy. Cashflow is king. I didn’t coin this phrase, but it is absolutely true. Prioritise cash over profit. With clear profit and loss and cash forecasts, enabled by up-to-date financial data, businesses can plan healthy cashflow.”

And there is a last note to add about all-important communication.

“Where businesses struggle, your accountant is here to help. Don’t struggle with a report or how to interpret something, just talk to us. We’re here to help you every step of the way. Not only can we run the reports you need, we can offer relevant, latest-position advice and information about help available.”

For more information on the importance of cashflow and putting best practice in place you can contact us today – you can book a free meeting to hear how our expert team can support your business.