Loan repayments, price rises and supply chain issues – a perfect storm?

cash flow debt collection May 07, 2021

As government support for businesses during the pandemic comes to an end a combination of circumstances means it is more important than ever to keep a careful eye on cashflow.

Common sense would suggest businesses should be allowed time to return to full-scale activity and repair their cashflow before they start paying back business support loans or deferred VAT.

However, according to the FSB (Federation of Small Businesses) chief of external affairs Craig Beaumont members are reporting that they are already receiving repayment demands.

While the IHS Markit’s purchasing managers’ index (PMI) for manufacturing activity shows that the sector expanded at its fastest pace in almost 27 years in April they are also being hit by price inflation and supply chain delays.

As an example, British Steel has this month announced a price rise of £50 per tonne for structural steel, its seventh price rise since the summer of 2020.

Businesses needing help can access this survival...

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Cash flow and Bank management

cash flow Apr 28, 2021

The potential for unmanageable debt and for overtrading are identified as two key pitfalls for businesses as they seek to recover from lockdown.

In the latest red flag alert from Begbies Traynor warned that 93,000 more UK businesses had “weakened to the point of 'significant financial distress' in the quarter to the end of March”.

The company predicts that even more companies could slide into insolvency as lockdown eases, citing the reasons above as two likely drivers.

I have warned before about the dangers of overtrading, when a business tries to ramp up its activity too quickly, running up a big rush of sales on credit without the cash to pay its suppliers.

My advice is to always and stringently monitor and manage cashflow and beware of being misled by Balance Sheet figures, which can paint an over-optimistic picture because they include fixed assets and possible new money from investors.

 

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Businsses should consider the RLS implications carefully

cash flow Apr 13, 2021

Can your business cope with another loan?

The latest Government initiative to help businesses to get back on their feet following the pandemic lock-downs came into effect on April 6, 2021.

The Recovery Loan Scheme (RLS) announced in the March budget is only available until December 31, 2021 and so far, just 18 lenders have signed up to participate.

They can be found here on the British Business Bank website.

Be aware that ultimately the lenders will decide whether to approve your application and not every accredited lender can provide every type of finance available under RLS.

There are some protections for borrowers in that lenders will not be allowed to take any form of personal guarantee for facilities of £250,000 or less. Above that amount lenders cannot include Principal Private Residences in the guarantee agreements and that the maximum amount that can be covered under RLS is capped at a maximum of 20% of the outstanding balance of the RLS facility after the proceeds of...

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Ignore it and it will all go away?

cash flow crisis Feb 17, 2021

It is very tempting in the current “abnormal” circumstances to ignore the warning signs that a business may be heading into difficulties.

But there is no telling for how much longer the current pandemic restrictions will continue and much of the support offered to businesses has been in the form of loans, or extensions to payment deadlines, that will have to be paid back.

Ignoring it all in our experience does not make situations go away, merely postpones the inevitable reckoning or actually makes the situation worse.

Directors need to continue with their monthly management accounts reviews, their checks on their balance sheets and their revenue generation despite the current circumstances.

They also need to understand their duties and liabilities.

Things may be grim, but there is still help out there.

K2 Partners has a number of guides to help businesses available in the Knowledge Bank of the Online Turnaround Guru website. They cover everything from dealing with debt...

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Business triage involves allocating limited resources to achieving realistic outcomes

cash flow crisis planning sme Jul 07, 2020

Business triage refers to the process of prioritising work in a crisis when there is more work to do than resources available to do it. The aim of triage is to maximise the outcome and minimise the damage by being realistic about what can be achieved with limited resources.

It is more commonly understood in the medical context, usually in response to prioritising treatment of casualties following disasters or other emergencies.

According to Investopedia, in a business context, “Triage helps companies by enabling them to attend to emergencies quickly, but it also poses risks, as it tends to involve the elimination of certain time-consuming steps that are normally part of the workflow”.

While business triage is normally associated with decision-making and action a crisis, its principles can also be applied to all forms of transformational change.

In my last blog I advised directors that now is a good time to conduct a strategic review of businesses in order to prepare for...

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Get expert help with cash flow management in a crisis

In the current pandemic situation, many businesses deemed non-essential have been forced to temporarily close for a lockdown period and it is clear that many SMEs will have serious cash flow problems when they resume trading.

Unfortunately, the cash flow problem won’t go away even though for the moment it is easy to ignore it by holing up at home.

While it is true to say that all businesses should have plans for dealing with emergencies and reserves for cash flow problems, it is unprecedented to have to deal with a period of no income and it is becoming clear that many SMEs – and larger businesses – do not have sufficient cash reserves to survive a lengthy lockdown.

Many are telling me that they paid their staff wages for the first month in anticipation of furlough support arriving in time to fund a second month but they are concerned about the Government’s promised CJRS (Coronavirus Job Retention Scheme) arriving in time to pay April wages. As for paying...

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SMEs applying for support under the Coronavirus Business Interruption Loan Scheme should read the small print

Grabbing a lifebelt when you are drowning makes sense, but when that so-called lifebelt is a business loan to survive the Coronavirus pandemic, you need to read the small print before signing on the dotted line.

The various government support schemes for SMEs may have made big headlines, not least their claims about making loans available for SMEs, but the devil is likely to be in the details.

No matter how panic-stricken you might be it is worth making sure you know exactly what you are getting into when applying for a loan under the Coronavirus Business Interruption Loan Scheme (CBILS). The difficulty many businesses are having getting through to someone at the bank is an indication of the problem, albeit it is hardly surprising given that banks have run down their SME support teams over the past twelve years.

Before even contacting a bank the first step is to take a deep breath and ensure you know exactly who to approach and what you can apply for. There are ample details about...

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Why you shouldn’t suspend your marketing during the Coronavirus pandemic

SMEs have had to close, suspend or reduce their activities due to the Coronavirus pandemic and most are looking for ways to minimise their cash out flow however despite the temptation they should be wary of cutting their marketing budgets.

But if your business disappears from the market and in doing so is no longer top of mind for your customers and clients will you be able to regain your position or will others who continued marketing replace you?

Withdrawing from the market may suggest you have gone out of business, as indeed will be the case for many as a result of the Coronavirus pandemic.

While it is understandable that SMEs in dire financial straits will want to preserve cash by cutting back on expenditure, some newly-published research from Opinium, released on March 26 has found that people do still want to hear from businesses of many kinds.

The research revealed that “a very large majority of people in the UK would like to hear either the same amount, or even more,...

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To Pay or Not to Pay Quarter Day Rent & Business Rates – the latest

As if the pressure and worries SMEs are facing due to the Coronavirus pandemic were not enough, yesterday (Wednesday) was when Quarter Day Rent was due to be paid.

For many, it was also a payment date for business rates although the government has suspended these for a year.

While SMEs may be eligible for suspending the payment of business rates as announced by the Chancellor in his first set of measures to help businesses survive the pandemic, little had so far been said about rent.

However, yesterday, the Government published details of three months’ protection for businesses from eviction for failure to pay rent. While is included in the emergency powers legislation that is due to be given Royal Assent today but we are still awaiting confirmation. There more details here.

Some businesses had already declared their intention to miss paying their Quarter Day Rent, like, for example Burger King, whose CEO Alasdair Murdoch announced on Tuesday that the company would not be...

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Something for everyone in the Spring budget – but will it be delivered?

Who could envy a Chancellor having to deliver a Spring budget just one month into the job and in the midst of a global pandemic?

The Spring budget came after the early morning announcement of by the BoE (Bank of England) of an interest rate cut from 0.75% to 0.25%. Was this an outgoing Governor stealing an incoming Chancellor’s thunder?

With short term measures to help businesses deal with the Covid-19 consequences and others dealing with the environment, infrastructure, business taxes and addressing regional inequality the Spring budget covered them all.

The headline was a commitment to invest in infrastructure in support of the government’s commitment to ‘level up’ the economy by focusing investment on the Midlands and North: “over the next five years, we will invest more than £600bn pounds in our future prosperity”.

Many worries of SMEs were addressed by the £30bn package of short term measures to deal with the consequences of the...

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