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The Importance of a Cash Flow Forecast – Top Tips during COVID-19

With so much uncertainty surrounding COVID-19, it is essential that businesses are prepared for the future. One of the things you could be doing right now to evaluate and secure the future of your business is putting together a cash flow forecast, highlighting any areas for potential problems. You can then act now to try and mitigate the effects of these issues.

Creating a cash flow forecast does not have to be overly time consuming or technically demanding. It just needs to be realistic and complete. We have included some hints and tips to bear in mind:

  • Think beyond lockdown. If your business is currently not able to trade, when does it appear likely that you can begin to work again?
  • Consider the usual seasonality, if applicable, of your sales.
  • Make sure that sales income is included when you would expect to actually receive the money.  Don’t forget the time lag between invoicing and receipt from your customers.
  • Include VAT if you are a registered business. 
  • Make use of formulae in a computer spreadsheet package.  By automatically totalling columns and rows, you will save time if you make changes to the figures.
  • Consider income from areas other than sales.  Have you applied for COVID-19 support such as loans or grants? Will you be selling any large assets?
  • When including wages costs, remember that the furlough scheme (Coronavirus Job Retention Scheme) has now been extended to the end of October 2020.
  • Include estimates of taxes, but if necessary remember that you can take advantage of certain payment holidays.
  • Consider any costs you may incur, such as implementing Cloud accounting software to allow your staff to continue to work from home effectively.
  • If instances of large capital expenditure are unavoidable, consider if there are alternative methods of financing which could spread the costs.
  • As for sales, ensure that costs are included in the cash flow when they are actually paid, not when the cost is invoiced to you.

If you find that the cash flow highlights a shortage of funds within the business, it is best to take steps now to mitigate the risks.  These could include:

  • Looking at areas where you can cut costs.  Examine all of the overheads – are they necessary? Could you secure a better deal?
  • Consider amending payment terms to your employees – moving to monthly payment runs from weekly payment runs could be beneficial.
  • Negotiate elongated payment terms with suppliers
  • Apply for Government assistance

If you require any assistance in collating your cash flow, or if you have any queries arising from your figures, then please do get in touch with us   01494 552100 or contact your usual Seymour Taylor representative.

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