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COVID-19: six actions for finance professionals on cash flow

5 May 2020: how to get cash flowing into your business. This guide, created by the ICAEW Business and Management Faculty, shares six practical actions finance professionals may wish to consider when considering cashflow to support their businesses through the coronavirus (COVID-19) crisis.

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Introduction

Finance professionals are key in supporting their businesses through the coronavirus (COVID-19) crisis. Most will be urgently working through the issues and helping their businesses respond. The purpose of this guide is to share six practical actions finance professionals may wish to consider when considering cashflow. We realise these are stressful times which have no precedent. Some options may be appropriate for your circumstances, but this may not always be the case. We also know ICAEW members are resourceful, adaptable and innovative in times of crisis. ICAEW’s vision is ‘A world of strong economies’ and now is the time when the profession can show leadership in protecting economies when they are at their most vulnerable.

The information in this guide is intended to be practical and helpful in these difficult times, but because every business is different in so many ways, the guide shares general guidance only and you should take appropriate professional advice on the circumstances of the business.

Action 1: manage cash outflows

Consider:

  • Making changes to financial management actions and processes to manage cashflow efficiently. For more information, see our financial management guide issued by the ICAEW Business & Management Faculty.
  • 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.

For insight on supply chains in the current evolving situation, watch our webinar recording on this topic convened by the ICAEW Business & Management Faculty.

Action 2: take professional advice

Action 3: manage cash inflows

Consider:

  • Making changes to financial management actions and processes to manage cashflow efficiently. For more information, see our financial management guide issued by the ICAEW Business & Management Faculty.
  • 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 the latest available guidance from from the ICAEW Tax Faculty visit our coronavirus and tax webpage.

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, from 4 May 2020, you may be able to access funding via a new Bounce Back loan scheme. The scheme allows small businesses hit by the impact of coronavirus measures to apply for a minimum of £2,000 up to a maximum of £50,000, or 25% of business turnover, with the government paying the interest for the first 12 months and guaranteeing 100% of the advance. It is expected that businesses will be able to apply online via accredited lenders. For more detail on the scheme click here.
  • 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:
  • 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:
  • 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.

    For more insight on how to do this, read our new cashflow and forecasting guide issued by the ICAEW Business & Management Faculty, sharing principles to help you adapt your approach for the current crisis. 

    Also, explore our guide on how to improve your financial modelling issued by the ICAEW Tech Faculty and this Faculty's good-practice guidance on how to reduce errors in spreadsheets.

    Where your cashflow forecasts shows you may need to seek additional financing, consider our guide to smarter business plans by the ICAEW Business & Management Faculty.

    Also visit the Government website for further information and templates.
  • 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.

    Further background information on business plans and treasury/cashflow management can be found in the ICAEW Library.

Importantly, if you need professional help with your business plan and/or managing cash flow, talk to your ICAEW Chartered Accountant or business adviser.

ICAEW is working hard to share practical know-how with members in these unprecedented times and the ICAEW Business & Management Faculty is working on further guidance which we will share as soon as practical. If you have additional questions or concerns not covered by current ICAEW guidance, please let us know by emailing the Faculties at bam@icaew.com or by completing this form

This guide was created by the ICAEW Business and Management Faculty, the voice of ICAEW on financial management, and in association with fellow expert Faculties. Working together, the ICAEW Faculties creates a mix of practical and technical resources to equip finance professionals to help the performance of the organisations they work for, and help these professionals meet their personal CPD requirements. To connect with like-minded professionals within these expert communities and, to gain access to the full suite of exclusive resources, visit www.icaew.com/faculties.