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

20 August 2020: How to get cash flowing into your business (COVID-19). 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.

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

  • Talking to your ICAEW Chartered Accountant or business adviser.
  • If in England, accessing a government grant that will help fund professional services, such as advice from an accountant, adoption of technology or the purchase of equipment. Applications for the grants will start in September 2020 but you can register your interest now with your local Growth Hub
  • Reading government advice (UK Government advice found can be here).

Action 3: Manage cash inflow

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 due to and anticipated to pay. Regularly review aged debtor schedules.
  • Being in communication with key or major customers on a regular basis so you keep abreast of their circumstances. Assign clear responsibility for review and regular 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 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 the self-employed:

For charities:

On 9 April 2020, the Chancellor announced £750m of support for front-line charities across the UK. For more information on government support available to charities, click here.

It is important to keep checking the UK Government website (including the dedicated financial support page) and please consider the following guidance when contacting HMRC.

Watch ICAEW’s Coronavirus hub for updates on a regular basis as new detail on how to access this support becomes available daily, and to keep up to date on government-backed support sign up for the ICAEW Tax Faculty’s news service here.

Action 5: Contact your bank and/or finance providers

Consider:

  • Contact your lender and seek forbearance on interest rates, capital repayments and terms of current overdraft.
  • Talk to shareholders about further injections or loans.
  • 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.
  • If your business is UK-based you may be able to access funding via the Bounce Back loan scheme. The scheme is open until 4 November 2020, unless extended. For more detail 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).

    CBLS will initially run for six months (from 23 March 2020).

    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 £45m and over, you may be able to access funding via the Coronavirus Large Business Interruption Loan Scheme (CLBILS). Funding may be available up to the lower of £200m or 25% annual turnover. Funding of over £50m is subject to additional restrictions.

    CLBLS is open for facilities taken out until 20 October 2020 (the government has a right to extend this to 31 December 2020).

    You cannot apply if you have utilised the Bank of England’s COVID Corporate Financing Facility (CCFF) – see below.

    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 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). The Bank of England will operate the facility for at least 12 months. Unless otherwise stated, the CCFF will close to new issuers on 31 December 2020

    More details on this facility is 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. The Future Fund provides government loans to UK-registered companies ranging from £125,000 to £5m, subject to at least equal match funding from private investors. The fund is being delivered in partnership with the British Business Bank and will run until at least the end of September.

Action 6: Update your cashflow forecast

Consider:

  • Refresh your cashflow forecast on a regular basis.

    For more insight on how to do this, read our 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 forecast 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.
  • Reflect 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 update your cashflow forecast for key assumptions, including the effect of lower sales or delayed or bad debts 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 extent 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 Faculty at bam@icaew.com or by completing this form.