Planning for difficult scenarios

Planning for difficult scenarios

Forward planning for the ‘what-ifs’ is a hugely important part of any business strategy. But now it is more important than ever because of the impact of COVID-19 and the huge strain on many businesses. Scenario planning helps you to forecast any potential problems in your business before they cause a cash crisis.

At the start of the pandemic many businesses experienced a huge cashflow squeeze because of the expenditure freeze created by lockdown. The Government CBILS and BBS and furlough scheme have been a welcome relief, helping businesses to buy some time to continue to trade and retain staff throughout this period. Over the next few months as furlough is being phased out, businesses will have to start paying staff again but a reduction in revenue means cashflow will be squeezed even further and may result in business failures and unemployment. Therefore, it is important to start planning now and review your cashflow forecast.


Future planning

Prior to the pandemic, cashflow management was one of the main pressures on businesses and with the increased pressures of a recession it is more important than ever to keep on top of it. The ability to convert work in progress and debtors into cash is essential. Cash is king right now, but companies must not ignore future planning and how to prepare for the recovery. It is key that businesses are proactive with detailed cashflow modelling – this will allow you to act on warning signs before they become a problem.

It is a good idea to start an early dialogue with key stakeholders before it’s too late to do anything about potential funding and restructuring needs. Key areas of focus include key performance indicators, cash flow forecasts, projected profit and loss and balance sheets, managing your debtor book, creditors, and work in progress. Review your cash position daily so you understand the impact of lower sales and bad debt. Consider which parts of the business may need to be restructured.

We understand that uncertainty in cashflow management can trip up even the most cautious and well-funded business. Many businesses fail not from lack of profit, but from a lack of cash. We can help you with your business planning and discuss potential alternative finance solutions such as asset finance that free up your cash. HMRC ‘Time to Pay’ is something to consider as well as a loan capital repayment holiday.

Our Corporate Finance and Banking team at Garbutt + Elliott are well placed to offer advice and guide you through this planning process For further information please contact Tony Farmer: