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Maximising your cash position

If income is dropping, slowly or quickly, you’ll need to understand techniques to make your cash last longer and give you a runway through to the up-curve.  Here’s some top tips, and your Blu Sky Account Manager is more than happy to talk you through these:

Ensure you have a forecasting process: 

Modelling tools can be quick and high level: use the free Blu Sky template, or software integrated with your accounting tools which automatically update – such as the Float cashflow app. We use this internally at Blu Sky.  Whatever tool you use, you need to understand how to use it, and that’s not just the technical skills but more importantly where some commercial though comes into play.  How does the COVID-19 situation affect you?  Are sales down to nil already or do you foresee a slow slide?  If you still have sales and income, now is the time to talk to your suppliers and customers and understand their plans for the next few months. 

We’re also being fed some fairly heavy hints that the lockdown tap may be released slowly, or turned off and on over much of 2020.  Think about how that impacts on sales and expenses.  Once the doors open properly how long might it take sales to climb again? Is there gradual growth or the opposite off the cliff?

Chase cash owed to you:

No-one should need telling this, but we can still be ‘terribly British’ over debt management.  If someone owes you money, ask for it.  It’s your money, and you need it.  Have a debtor control process: know what steps you will take and when.

Check and cut your discretionary expenditure: 

We’re all helped by the fact we can’t spend half the months income down at that superb independent coffee shop, but analyse every line of expenditure going through your bank.  How many SAAS products do you subscribe to?  Do you need them all?  If you need a subscription can you still downgrade it?  Line by line through the bank statement. 

Then analyse your biggest costs: 

Usually people and rent.  The people side is helped by the measurements put in place by the government to cover most employees – see our other blogs if you’ve just arrived back from Mars!  You’re a business owner, it’s your job to be decisive and make the hard calls.  The Coronavirus Job Retention Scheme (CJRS) is there to protect jobs, and is helpful at this stage.  It may not put off redundancies forever, but can give you some breathing space whilst you work out the resourcing you actually need and the employment law implications thereof.  Negotiate with any large supplier, rent or otherwise, for reduced or deferred payments. 

Access available help: 

There’s unprecedented government help here.  From deferment of VAT, the introduction of CJRS, local authority administered grants for specific markets (tourism and leisure, estate and letting agencies amongst them) to smaller grants for any business paying under the small business rates reduction scheme.  It’s a grant, you don’t need to pay it back – get it and get it now.  Also don’t forget pre-existing help such as the NBSL scheme in the North East which can grant up to 40% of project work – which many include cashflow setup work from the likes of ourselves amongst other things. 

Be on top of the numbers:

Forecasting is about the future, but if you don’t know where you are today you have no chance of making it work.  Today’s cloud accounting solutions, such as Xero, support ‘in time’ (let’s not pretend real-time) data, certainly reconciled up until the last 24/48 hours.  Use the tools for what they were designed for, understand your cash position (including who owes you and who you owe) today and you have a better chance of forecasting tomorrow.

Reappraise daily:

Check the bank every day, take action every day.  Make cash administration a priority, not an annoyance.

Work on your business – get efficient:

Once we’re out of the shutdown, the new normal won’t be exactly the same as the old normal.  Take the opportunity to look at all aspects of your businesses.  Where could you be more efficient, where could you be more profitable, where are the drains on your time that add no value?  Work out how you can get a nose ahead of the competition once the world starts turning again.  It may be your new normal has lower costs, so can have more profit, and fewer headaches, for less income.  That’s a win!

Don’t forget the future:

Finally, try to work a forecast that gives you sufficient resource to spark growth and profitability going forward.  Retain your key players as long as possible, continue to maintain supplier and prospect relationships even if no cash is currently changing hands. 

I hope that gives food for thought, if you’ve any questions please give or a shout.

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