The Cash Crunch – how local accountancy services can help

Covid-19 has been an eye-opener for many business owners, as it has highlighted that they don’t know how many months of cash reserves they have in place or if they are cash-flow positive or negative.

As local accountants, we have been educating our clients on their finances, business continuity and scenario planning and helping them make long-term business decisions to ensure their businesses survive COVID-19. We look at the key things you should be considering.

Understand your cash-flow

Cash-flow is the amount of money flowing in and out of your business. In the past, you may have been focused on profit, but COVID-19 has highlighted the importance of analysing the immediate and future needs of your business by:

• Identifying business critical payments
• Reviewing all direct debits and standing orders
• Reviewing savings, investments and income withdrawals to see if they can be altered.

Whether you run a limited company or are a sole trader it’s really important that you also think about your cash-flow over an extended forecasted period, rather than just surviving day to day.

We understand this can be daunting, which is why we are offering free business advice consultations. Our goal is to help you have visibility over your business accounts, so you can be 100% confident about where funding will come from for the next rent or payroll payment.

As well as reviewing your pain points and projecting your cash reserves in a worst-case scenario, we will also provide you with advice, templates and resources so you undertake your own financial reviews.

Tips for dealing with creditors and debtors

It’s a difficult time for business owners and individuals and you may feel awkward chasing debts. However, a number of our clients have taken the opportunity to assess ways of operating more effectively and how they can collect debts without souring relationships. This includes:

• Sending invoices early
• Making it easy for people to pay
• Considering early payer discounts
• Chasing invoices early
• Agreeing on clear payment terms and plans
• Putting into place cash collection tools such as GoCardless direct debits for monthly recurring payments.
  
  

The simplest solution is often the most effective and we encourage clients to pick up the phone and talk to people as this could help you quickly come to a mutually agreeable solution.

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Planning and contingencies for running your business

COVID-19 has highlighted the need for small businesses to plan in advance and have contingencies in place. Our tips include:

• Save rather than spend the VAT from a customer’s bill so when you come to pay your tax return, you have the money
• Try and save each month to pay your personal taxes
• Check for cost efficiencies in the delivery and supply of products and services. Focus on inventory control and lease (don’t buy) where possible.
• Look for short-term revenue strategies like selling gift cards, encouraging pre-orders or driving discounts (although exercise caution).
• Consider furloughing staff (deadline is 30 June) or make redundancies if necessary.
• Explore the support options available including government relief funds and credit from the bank.
  
  

Local accountancy services – here to help

If you’re concerned about your cash-flow and need assistance from an accountant in Aylesbury, who can provide proactive support, we would be delighted to talk to you. We also offer a range of other accountancy services to meet your needs, such as bookkeeping and payroll.