There has never been a more important time to look after the cash flow within your business. We all know that cash is King. If you forget to protect the King you lose the game. The months ahead will reward those with the capacity for strategic thought and forward planning.
The government has provided unprecedented support to businesses and workers to protect against the economic emergency caused by the coronavirus. As the furlough scheme transitions into the new Job support scheme, as the deadline for Bounce Back and Interruption loans passes there is a sharp focus on the cash flow of every business nationwide. From grants, rent holidays, VAT deferral, all of the economic policies are underpinned by a belief that companies should be assisted to have as much cash in hand to weather the storm.
We are being advised that both from a social and commercial perspective we must learn to live with the current situation as the time for a complete halt has passed. If we completely stop the damage may mean a much tougher recovery. Businesses must trade, although with limitations, restrictions and safety considerations.
Having a clear plan, whilst being able to be flexible changing strategy as situations change is only possible in its most basic terms if you have the money in the bank to do so. It is important to note that a business does not have to be failing to become insolvent, it is not having the cash reserves to keep the lights on. If a business has poor cash flow and low cash reserves it massively reduces the chance of outlasting the uncertainty of the current situation.
When the economy is struggling, on the whole businesses start to pay creditors more slowly with this having obvious repercussions – “I’m waiting for payment myself”, “As soon as I have it you’ll have it”. This puts stress and pressure on supply chains, on working relations, on ultimately the solvency of all linked stakeholders. Whilst it is important to accept the current challenges companies face this should not be done so at the risk of your business. Every business has a duty to look out for their own best interest in order to fulfil their own obligations.
Bright Sky Contracting is offering a free credit control audit for any company. If you do not know what your DSO is we can tell you, and why knowing this number can create a structured approach to ensuring the money you have earned is in your bank account and not someone else’s.