Rick Smith, Managing Director of Forbes Burton, a leading business rescue and recovery consultancy, shares a few key points on how to manage money properly during a crisis such as COVCID-19
When a business has the rug pulled from underneath due to an unacceptable cash flow, there could be some sort of panic that starts to creep in.
Regardless of hitting sales targets one month or keeping material costs down for a project, it can occur, especially when in crisis such as COVID-19, it’s best to have a Plan B and C when needed.
And also when you’re trying to buy materials for the next building project, you may find that the invoice you sent for payment, there will now be a delay on them arriving for a project, causing delays and at worst, cancellation for the foreseeable future.
It is worth noting that employees and company bills will not wait for your customers to pay, so while upfront cash may be needed to offer products and/or services may be useful to extend credit to customers alongside invoicing them, it can be easy to run out of cash to fulfil existing orders.
Chase those invoices
Look into the Business Support Fund that the government has provided, but for self-employed individuals such as contracted builders, grants of up to £2,500 can be given if the last three years of invoices and tax returns sent through HMRC can be verified.
You should be aware of the number of debtors you have at any given time; keeping cash flow in mind will help to keep your business operating day-to-day.
It is also advisable to set a debtor’s book limit appropriate to your business’ capacity. Once this limit has been reached, you could ask new customers to pay in advance. This ensures that you aren’t adding more debt to the business, and only needs to be introduced in the short term until your debtors are cleared. Another option is to invoice for a percentage of the fee upfront for some or all of your customers.
Communication and compassion are the above points that need to be taken into consideration, but planning how to steer the business during lockdown, especially if it's extended into July, for example, is incredibly important.
Draw up several scenarios for the business; could everything be shut down for a month perhaps? What about a custom email so people can request materials for the summer season?
Plan as much as you can alongside your team who want to make sure that they have a job to do during these difficult times; it can help them feel safe, valued, and secure in the fact that there’s money coming in.
Keep track using appropriate software
There’s fantastic software out there that can really help your business keep track of what’s coming in and what’s going out. Software such as QuickBooks and Sage are great examples of easily accessing company books and what can be managed during these times.
But even with this, it also helps to communicate with a wider net of your team to let them know of the current cash flow. Software can’t do everything for you, and it always helps to keep the communication lines open throughout a crisis, with both your suppliers and customers; so you know exactly when to expect money going out and coming in.
Throughout a crisis such as Coronavirus, it’s incredibly important to have some compassion. Everyone is in a similar situation here, and it might be the case that people simply can’t afford to pay their invoices right now.
Unless your business itself is in dire straits, it might be best to wait it out as long as you can before chasing payment through solicitor's letters and other such means. As long as businesses can work together for the greater good here, everyone will pull through.