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What’s around the corner - cash-flow tips to help plan ahead

Client Support
Dan Garside
14/05/2020
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As many businesses come to grips with operating at a much reduced capacity or even mothballing operations entirely, as lockdown gradually starts to ease now is the time to consider what issues might be coming up around the corner.

During our recent Access to Finance webinar we highlighted some of the points that firms need to factor into their short term planning strategies and models, and we have detailed below the top 5 key areas for you to consider.

1. Invoice discounting funding issues

Most agreements of this kind will have recourse arrangements (i.e. remove the ability to finance certain invoices) if invoices remain unpaid after 90-120 days. We would urge you to therefore check your position in this regards and consider the impact this may have on your ability to borrow against your debtor book, as cash shortfalls may occur and additional financial support (potentially via CBILS) may be required. It is worth noting that a number of the invoice finance funders are also now accredited and able to offer CBILS loans
alongside an invoice finance solution. Niche funding solutions are also available in the form of single debtor invoice financing, whereby a particular account or invoice can be used to assist with cash flow without offering up the entire debtor book.

2. Working capital erosion

It is good to hear that many businesses are presently managing through these difficult times, but please be careful and consider the impact this is having on working capital reserves. They are likely to be severely impacted and may require replenishing via borrowing such as CBIL or the Bounce Back Loan (BBL) scheme. In our experience, understanding true working capital needs can be a complicated exercise and this will prove harder as businesses start to re-open with reduced capacity and uncertain order books. Planning for re-opening should therefore factor in your working capital needs, and if you need support in understanding this we can help develop modelling that gives you the ability to see cash flow peaks and troughs in the future. We would also encourage you to be mindful of any seasonality you may normally experience across the business. Re-opening shortly after what normally would have been a peak season, and heading into a low season may mean that the cash reserves required to operate are not where they need to be.  Careful consideration should therefore be given to the merits of opening up verses the ability to continue to mothball/run operations on a skeletal basis.

3. Early CBIL applicants

Consider whether you should refinance debt via the new BBL scheme or other finance options, as this may potentially provide cheaper borrowing or an ability to move the security over to a 100% backed scheme. Clearly this will depend on the size of the facility you require as the BBL scheme provides funding up to a maximum of 25% of turnover capped at £50,000.

4. Creditor pressure

As the court system comes back into full swing, so creditor pressure might start to increase as businesses look to keep themselves liquid, especially as working capital requirements rise across the economy. Managing creditor expectations remains important and transparent communication key to gaining agreement for individual time-to-pay arrangements. If creditor pressure turns into court applications and CCJ’s, businesses could look to protect themselves by using Creditor Voluntary Arrangements. Business owners need to carefully consider all options open to them as taking more debt on during such uncertain times may not be the right thing to do for long term survival.

5. Cash flow modelling for strategic planning

There is no doubt that it is very difficult to predict what the true trajectory for any industry is as we return to trading, but having the ability to quickly flex your cash flow modelling will be invaluable. We would urge you to start this planning now so that you can a) understand the cash flow impact of re-opening at a certain capacity and income levels, b) the impact that the debt repayment will have in the short to medium term, and c) the longer term impact this may have on strategic exit plans.


As ever, we are here to provide support through these challenging times and are closely monitoring the situation so we can best advise our clients. If your business is in need of financial assistance then please do liaise with your regular Rickard Luckin contact who will be able to help and advise on the most appropriate route to raising finance. Alternatively, you can email me directly at [email protected] to discuss any questions you may have regarding any of the above.

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