bussiness sale on ttackDo you have clients which are decent businesses who are now financially stretched?  Perhaps in the past they’ve done well despite their accounting side not being great.  How will they fare as the Covid 19 crisis progresses?

We are in far from normal times. Good businesses which had strong balance sheets are suddenly facing challenges they’d never contemplated. The first stage is rightly to access available government support, but what happens after that? How will they cope as things move forward and then once things start to get back to normal?

The fundamentals of financial management have not changed (the links in this piece are to previous articles). While it may not be a panacea, good financial management should help many businesses navigate through the next few months and come out the other side; for some it will make a crucial difference.

How can you help with financial management?

As well as helping clients take advantage of government support, advisors are well placed to help them look ahead. The uncertainties are greater than ever, so it will be really important to be able to respond to change.

Here are some thoughts on areas where you may be able to give advice or help:

  • Weekly rolling cash flow forecasts:

While businesses may be able to defer VAT payments or use the Job Retention Scheme, these schemes will eventually end. Extra demands on cash flow often arise at the end of a slump when growth needs to be financed. It will be really important to anticipate the pressure points.

The title Cash flow – do you have 13 week vision? may seem a little bit hollow at present, but the article  explains why it’s important to keep looking ahead.  (Some businesses may also need to forecast on a daily basis to manage immediate challenges).

  • Incisive management information:

    • This is much more than using a standard accounts format from a software package. The article Management accounts – do yours ‘speak to you’? explains further.
    • As well as KPIs relating to profitability, balance sheet related KPIs (such as debtor days) will be important.
    • To truly understand what’s happening, information may need to be more focused. For example, a large customer has been given extra time to pay while it’s sorting out funding – it may be worth producing separate debtor days information for the other customers.

Razor-sharp information will help the client make decisions, compile or adapt plans and, if funding is needed, be well placed to answer questions.

  • Advice on cash management processes

This includes sound credit control, timely billing, a focus on related KPIs and dialogue with both suppliers and customers. Trust is likely to play a big part and being able to deliver on promises could be very important.

  • Thinking about risks and opportunities

    The business environment is in a state of flux – which means more risks and perhaps some different opportunities. Many large organisations have structured processes in place to manage this.  That won’t be desirable for most small businesses, but putting risk on the agenda will be useful for both focusing the mind and putting things in perspective.

  • Business planning

    Financial information and risk management should feed into business planning. With potentially dramatic changes – financial modelling may need to be flexible and informative.  With a high degree of uncertainty, modelling may need to look at more than one scenario.

  • Funding

    Whether it’s inside or outside the CBIL scheme, clients will need help with funding proposals and assessing their impact. Invoice discounting may be a good way forward for some businesses once things start to get back to normality -but the implications will need to be assessed.

How we can help you

David Lewis is happy to support advisors informally by being there as a sounding board.  Looking ahead, some firms may lack the skills or bandwidth to provide the support their clients will need – Camrose Consulting can support you:

  • on client projects, either working alongside the firm’s staff or independently.
  • or through training small groups of staff to help them develop their commercial perspective.

If you’d like a conversation do contact David on 07836 331677 or david@camroseconsulting.co.uk.

This article is for general information and interest and may not be comprehensive. Specific circumstances will also vary. We do not accept responsibility for any loss arising from any person or organisation acting or refraining from acting based on information contained herein.