Cashflow

We understand that cashflow will inevitably be an issue for businesses in the coming weeks. The impact of less cash coming in from customers mixed with payments that need to be made and commitments to employees will more than likely lead to a quick deterioration in cash balances.

One of the first steps that we would recommend is forecasting cashflows for the next four or five months. This doesn’t need to be done with expensive software or apps but can be plotted on a piece of paper or in excel, but it does need to carefully identify on a monthly basis the cash you expect to receive and pay out. This cash flow forecast should also include estimates for various tax payments, Corporation Tax, VAT and PAYE. These can be based on your last payments as a guide.

We are often asked how to forecast cash receipts. As you want a guide to the receipts you might get, look back through bank statements or your book keeping records to see what daily, weekly or monthly averages you have been achieving and use these.

Once you have established the baseline cash position you should then look at flexing the cash receipts to allow for a slow down in money coming into the business. This will hopefully then give you an idea of where your cash position will be if things deteriorate and people stop paying their bills.

Armed with this information you will then be able to make some decisions about what mitigating actions you might be able to take. Some of the other articles in this guide provide information about some grants and sources of funding that might be available to you.

It is important that you plan your cashflow carefully and where shortfalls are predicted plan to fill the gaps with mitigating actions you can take and also using the support schemes that are available.