The roadmap to recovery: six proactive steps for business owners to take now

For months, we have been talking to our clients about the ins and outs of furloughing, whether the CBILS or the BBLS is the best choice for them and how to access grants to carry them to the other side of lockdown.

But, the truth is, these measures are coming to an end relatively soon, and when they do, you need to make sure your business is prepared for the short term hurdles, anticipate challenges that may impact the longer term running of your business and spot opportunities that could prove invaluable.

Take a minute to ask yourself these questions:

  • Have you been struggling with cash flow because you are still trading but at much lower levels because of social distancing or a drop in demand?
  • Are you in a fairly good cash position because you closed up shop, furloughed your staff and accessed a CBIL or Bounce Back Loan but now you’ve restarted, your costs are rising quicker than your income?
  • Has the demand for your usual products or services taken a nosedive and you’ve had to diversify into new areas to fulfil a spike in demand elsewhere? If so, has this changed the structure of your workforce?
  • Have you realised that your financial information isn’t easily accessible or up to date, so you don’t really know if you are in a strong position or struggling?

If any of these resonate with you, then we urge you to read on. Of course, each business owner will have faced unique challenges during the pandemic, therefore each roadmap to recovery will differ, but there are fundamental steps that you need to take to ensure you are in the strongest position to succeed. Some of these points need immediate action, and others need to be thought about over the coming months and years, but all will help you navigate the ‘new normal’ with confidence.

In this blog, we’ve outlined six proactive steps that business owners can take now to improve their short term cash flow, as well as thinking ahead to a post-coronavirus world.

Do a 12 month financial forecast as soon as you can

Forecasting and planning is vital for you as a business owner to minimise the impact that COVID-19 has on your future. Without question, you need to do a 12 month financial forecast. We don’t mean one based on guesswork or using figures from six months ago, because how can you know which direction you need to go if you don’t know where you are right now? You need to use the most up to date data available to you, because it’s much better to know you are in a less than ideal position and create a plan to recover rather than burying your head in the sand and hoping for the best. If you’re using a cloud accounting software like Xero, then you’re already ahead of the game and we can easily help you prepare a forecast.

Not using cloud accounting software? Don’t worry, we can still help you prepare these forecasts, it just might take a little more manual work to determine your current position. It also might be an ideal time to get your figures straight and make the move to a cloud based system.

Regularly review your cash flow (daily, if possible).

We’ve said it before, and we will say it again. Reviewing your cash flow regularly is the primary and most crucial step in managing your business’ cash flow. This will ensure you have a clear picture of your true, current cash position, and therefore what your immediate and medium to long term financial requirements are.

At a minimum, you should be maintaining a weekly, simple cash flow forecast with a full picture of money coming in and out of the business which can be easily adjusted to the ever-changing internal and external factors.

A well-constructed cash flow forecast will enable you to pick up on any discrepancies, highlight opportunities, and offers a solid basis to make any financial decisions. Furthermore, by demonstrating that you are in control of your short-term cash position, your stakeholders or lenders will have confidence in the figures and decisions.

If you do not currently have access to a short term cash flow projection or require assistance preparing financial projections and business plans, both short and medium/long term, our expert Corporate Finance and Business Advisory teams are here to help.

Scenario plan to see how your cash flow will be affected by different factors

Scenario planning will take a lot of the guesswork out of what your future cash position might look like. This involves changing key assumptions or ‘scenarios’ to see how this affects future cash flow.

Examples of ‘scenarios’ to evaluate could include:

  • Fluctuations in sales volumes
  • A payment holiday on loans, rent or other overhead costs
  • Sale of unrequired assets
  • Extended payment terms from suppliers
  • Renegotiated contracts with customers offering amended payment terms
  • A time to pay arrangement with HMRC
  • Deferral of dividends or bonuses
  • The costs and impact of reducing your staff numbers
  • Postponing significant one-off costs (e.g. a large advertising campaign or office renovation)

These are just a handful of adjustments that you can make and the changes that are right for your business will depend on individual circumstances, however, through scenario planning, you will be able to determine which decisions will offer the greatest benefit to your business.

Fluidly is a platform that integrates with various online accounting systems. Their free version, Fluidly Lite, is available to anybody and offers a basic scenario planning function. If you use Xero or Quickbooks and have a solid understanding of your current financial position, you can link your account up and use their scenario planner to see how changes will affect your short term cash position.

If you’d like to learn more about using Fluidly, contact Pippa.Holdright@hboltd.co.uk. If you do not use an online cloud accounting system or would like to work with our team on a more complex, bespoke cash flow forecast, please contact Greg.Philp@hboltd.co.uk

When examining your cash position, it is also an ideal time to audit your internal control procedures to ensure efficiency when managing cash within your organisation. If your cash management policies are a little outdated, we recommend that you take a look and adjust.

Seriously evaluate your staffing needs

Whether it’s due to a fluctuation in demand, a change in structure of your workforce or an investment in a more efficient process, your staffing requirements may be very different to what they were six months ago.

Salaries and wages are the biggest overhead for most businesses so it’s important to make sure you have the right staff with the right experience in the right roles, and that you are paying staff what you need to pay in order to have the most efficient team.

If you have made any changes to your business or how it operates during the past few months and you now have skills gaps in your team or extra demand for new areas of the business, then you may benefit from looking into the Kickstart Scheme or taking advantage of the additional apprenticeship financial support. Remember, if you look to use the Kickstart Scheme, the jobs must be new, quality jobs with training set as a priority.

Unfortunately, redundancies may be essential in some recovery plans, and are never a decision taken lightly by any business owner. They should be considered only after all other alternatives have been explored and evaluated. If you have determined that redundancies are essential, the financial aspects shouldn’t be the only consideration. Evaluate the skills, experience, culture fit and performance of those at risk as losing a strong member of the team could do more harm than good.

If you are making any decisions that will impact your staff, we would always recommend talking to a HR and Employment Law specialist to ensure you do not make any changes that are in breach of existing contracts. Our HR Consultant, Paul Lawrie, will be able to assist with any questions in relation to your staffing decisions.

Recognise changing consumers demands and adapt accordingly

It’s no surprise that buying behaviours have dramatically shifted therefore you may need to explore alternative avenues for revenue generation. These behaviours aren’t necessarily going to revert back to how they used to be, so if your current business model isn’t meeting consumer demands and needs, think about how you can adapt and innovate with a long term outlook. However, don’t just assume any changes. Take advantage of consumer data at your disposal to understand consumer trends in your marketplace. These changes will all impact your future business planning so it’s important to evaluate any change and build these into your budgets and cash-flow forecasts.

Think about the medium to long-term financial needs of the business now

We strongly encourage businesses to anticipate any requirement for additional support or finance, even as a precautionary measure, and to think about medium to long term funding requirements within the bigger picture of the post-COVID 19 world. As we’ve mentioned before, whilst the government support packages have been vital in helping businesses survive, this support is ending, and fairly soon. First things first, ensure you have accessed the COVID support that you can, but also look at your existing loans and finance facilities, some of which you may have got prior to the pandemic. Every new business plan should include a fresh look at current financing and an assessment of whether it is still suitable. Could savings be made by consolidating debt or switching lenders rather than taking on further financing?

We can offer a free financial health check, where our in house finance consultant, Mark Edwards, can evaluate your position and offer practical steps to make your finances work harder for you and your business.

To book in a call with our Corporate Finance or Business Advisory Teams to get started on any of the steps above, contact Greg Philp on greg.philp@hboltd.co.uk or Holly Andrews on holly.andrews@hboltd.co.uk or call 01926 422292. In the next blog in this series, we will take a look at the medium term considerations to fuel your recovery, ensuring your business is as efficient as possible in order to thrive.

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