Six actions for finance professionals on cash flow

This guide, created by the ICAEW Business and Management Faculty, shares six practical actions finance professionals may wish to consider. Some options may be appropriate for your circumstances, but this may not always be the case. Because every business is different, this is general guidance and you should take appropriate professional advice on the circumstances of the business. 

Written on April 7, 2020 by Xeinadin Group

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Actions:

  1. manage cash outflows
  2. take professional advice
  3. manage cash inflows
  4. access government-backed support
  5. contact your bank and/or finance providers
  6. update your cashflow forecast

Action 1: manage cash outflows

Consider:

  • Making changes to financial management actions and processes to manage cashflow efficiently.
  • Raising awareness about the importance of cash in your business. Make it clear how important it is to know when suppliers are anticipating payment and go through creditor schedules regularly.
  • Contacting your landlord and lenders to seek time to pay, forbearance on interest rates, capital repayments and terms of current overdraft where appropriate.
  • Communicating regularly with your landlord and critical business suppliers and pay to terms where appropriate.

Action 2: take professional advice

  • Talk to your business adviser. They are there to support you and your business.

Action 3: manage cash inflows

Consider:

  • Making changes to financial management actions and processes to manage cashflow efficiently.
  • Raising awareness about the importance of cash in your business. Make it clear how important it is to know when customers are anticipated to pay and regularly review aged debtor schedules.
  • Being in communication with key or major customers on a regular basis so you keep ahead of their circumstances. Assign clear responsibility for review and regularly communication with each key relationship with a view to preserving the long-term relationship.
  • Arranging to collect new sales on order or delivery and seek to collect from customers who are due to pay. Assign actions to staff and check they happen.
  • Checking the terms of business insurance policy in case it covers pandemics or government ordered closure. Stay in touch with your insurance provider as appropriate.

Action 4: access government-backed support

Governments across the world have responded to help business during the crisis in ways relevant to their local economies. ICAEW is a member body of IFAC, an organisation comprising more than 175 member and associate bodies in 130 countries and jurisdictions, reaching nearly 3 million professional accountants. IFAC has developed a dedicated web area with essential resources, guidance and advice from local member bodies and other stakeholders.

In the UK, the Government has released a range of business support measures for UK businesses during the coronavirus pandemic. Consider:

For businesses:

Review the range of government-backed support, including:

For self-employed:

For charities:

On 9 April 2020, the Chancellor announced £750m of support for frontline charities across the UK. For more information, click here.

It is important to keep checking the UK Government website (including the dedicated financial support page) and ICAEW’s Coronavirus Hub for updates on a regular basis as new detail on how to access this support becomes available daily. Also, please consider the following guidance when contacting HMRC.

For insight on the queries ICAEW has raised with HMRC and to hear an update on the latest available guidance, watch the recording of the experts from the ICAEW Tax Faculty.

Action 5: contact your bank and/or finance providers

Consider:

  • Contacting your lender and seek forbearance on interest rates, capital repayments and terms of current overdraft.
  • Talking to shareholders about further injections or loans.
  • If your business is UK-based activity, with annual turnover up to £45m, you may be able to access funding of up to £5m via the Coronavirus Business Interruption Loan Scheme (CBILS). Consider the following:
    • Check your business’ eligibility here.
    • You will need to apply for funding via your bank, or one of the accredited lenders.
    • Be prepared to support your application. Each bank will have their own requirements, but typically these may include management accounts, cash flow forecast, business plan, historic accounts and details of assets.
    • Understand the security requirements, including personal guarantees that may be required on loans above £250,000.
    • An update on the scheme can be found here and more detail on this scheme is available on the British Business Bank's website in FAQs for SMEs: Coronavirus Business Interruption Loan Scheme and how to apply.
    • For insight on how to prepare a strong CBILS application, click here.
  • If your business is UK-based activity, with annual turnover of over £45m, you may be able to access funding of up to £50m via the Coronavirus Large Business Interruption Loan Scheme (CLBILS). Consider the following:
    • Check your business' eligibility here.
    • You will need to apply for funding via one of the accredited lenders.
    • You cannot apply if you have utilised the Bank of England’s COVID Corporate Financing Facility (CCFF) – see below.
    • Be prepared to support your application. Each bank will have their own requirements, but typically these may include management accounts, cash flow forecast, business plan, historic accounts, and details of assets.
    • Understand the security requirements, including personal guarantees that may be required on loans above £250,000.
    • More detail on this scheme is available on the British Business Bank’s website in FAQs for Business: Coronavirus Large Business Interruption Loan Scheme (CLBILS) and how to apply.
    • For insight on how to prepare a strong CLBILS application, click here.
  • A new lending facility from the Bank of England is available to help support liquidity among larger businesses, helping them bridge coronavirus disruption to their cash flows through loans, under the COVID Corporate Financing Facility (CCFF). Consider the following:
    • Check your business’s eligibility here.
    • You will need to apply via your bank or, if your bank does not issue commercial paper, one of the accredited lenders.
    • If the bank considers that your business is eligible, you will need to prepare documentation including:
      • an issuer eligibility form.
      • an issuer undertaking and confidentiality agreement.
      • a guarantee.
      • a legal agreement from the primary entity in your business’ group.
      • evidence of authority to sign on behalf of the business.
    • The bank will help you submit the documentation to the CCFF.
    • More details on this facility are available on the Bank of England’s website here.
  • Loans may not be suitable for all businesses and even grants may not meet some companies' need for funding. Schemes and incentives which encourage and stimulate private investment into such businesses are useful. Launching in May 2020, the Future Fund will provide government loans to UK-registered companies ranging from £125,000 to £5m, subject to at least equal match funding from private investors. Announced by the Chancellor of the Exchequer, the fund will be delivered in partnership with the British Business Bank and will run until at least the end of September.
  • The Business Finance Guide, created by the British Business Bank and the ICAEW Corporate Finance Faculty provides information on working capital solutions and sources of professional advice. The website also gives insight on managing cash in times of change and uncertainty.

Action 6: update your cashflow forecast

Consider:

  • Refreshing your cashflow forecast on a regular basis.
  • Reflecting government-backed support, business rates holidays, cash grants and loans that you are eligible for, noting the exact timing of the availability of this support remains uncertain and assumptions in cashflow forecasts should be monitored closely.
  • Regularly updating your cashflow forecast for key assumptions, including the effect of lower sales or delayed or bad debt on your cash position. Make sure you know your cash situation on a basis that makes sense for the nature of your business – this could be daily or could be monthly. You need to know how much cash your business can draw upon, what the position will be under different scenarios and intervals, and the extend of additional finance required.

From: https://www.icaew.com/technical/business-and-management/financial-management/financial-management-implications-of-coronavirus

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