We are living through one of the most challenging times of our lives. It’s certainly the most difficult since the Second World War. During this time, it’s crucial that you have a solid plan in place to manage your finances and your cash flow. Without proper planning, things could become a lot worse. Businesses must prepare for a changing environment and the upcoming challenging economic crisis.
The belief in the wider economic and accountancy field is that cash management is key to not just the next few months but the coming two to three years as we emerge out of the impact of COVID19. As all of you will now be aware, the Chancellor Rishi Sunak has warned of a ‘recession like we’ve never seen’ before.
This is an ominous warning, one which we must pay attention to. If we are going to come through this and sustain our businesses and stave off financial ruin, we must prepare for the new way of working in our post-COVID19 economy.
The Fraser of Allander Institute has stated (May 2020) that:
- Social distancing will become part of the new normal
- As the economy comes back, we will need to be ready for very fast changes to meet the requirements
- We need a long-term consideration for economic recovery
- This will need to be balanced with increased austerity
Cash Flow Management for Business
Taking these points into consideration, everyone needs to implement at least some basic Cash Flow Management for their business. This will involve:
- Creating a detailed cash tracker
- Appointing a person to review cash flow every day, day-by-day download of the position in the bank
- Development a weekly and monthly cashflow rolling forecast
At this moment, your ability to understand your available cash is key to your businesses’ future survival. The next “stress test” will be your liquidity. You must ask yourself these questions:
- Do you have 6 months of cash in your business for reserve?
- Does your business have the financial resources to weather more than a couple of years of brutal financial storms?
- Can your business lose lots of money for many quarters in a row and still safely operate?
Over the coming months and years, it is those who are willing and able to adapt who will weather the coming storm and be successful.
CJM have been supporting business in financial management for the past twelve years. A recent client provided an overview of how we operate. We have enjoyed repeat business from many successful SMEs, start-ups, organisations in the third sector and larger organisations. If you want your business to not only survive the coming recession, but thrive in it, talk to CJM.
Still not sure? Check out a recently testimonial from a client below.
I’d like to just take a moment to thank you all at CJM for the support you’ve given to me in terms of coming back to my queries quickly, offering sound advice throughout my time with you and in particular during Covid. You guys have been brilliant at keeping me alert and up to date with support and funding availability and processed my furlough claim unprompted. Thank you so much, all of you.
(Dan, Limited company, Glasgow)