117. How does your cash preservation strategy measure up against our 11 cash actions?

We have consistently stressed the importance of cash management and it is even more crucial now.

Tectona are perfectly placed to help you manage your cash ups and downs.

Here is our ELEVEN Point cash preservation strategy pulled together from experiences based on working with our client base which will help you make your cash go further.

1. Implement cost reductions to save cash

  • Furlough staff and consider right-sizing the business for the future by utilising part-time working for furloughed staff from July
  • Reduce unnecessary outsourced expenses
  • Review and maintain tight control of general/other expenses

2. Focus on bringing in receipts for new business

  • Consider other potential income sources
  • Keep discussions going for new business and look to get new customers on-boarded for the future
  • Keep in close contact with customers and provide advice and support to help them get ready for the post-Covid future

3. Defer payments to suppliers

  • Keep in close contact with your suppliers
  • Aim to pay in line with terms but consider pushing out payment, always in discussion with those suppliers

Tectona Tip – do not strain or push your suppliers too hard or without engaging with them first; if you do, they will probably not be there for you when you need them most.

4. Claim any R&D tax credits

  • We are still surprised by how many businesses that are eligible for this, effectively a grant, have not even applied
  • This can provide a welcome and urgent boost to cashflow
  • It is a complex, nuanced area of taxation and we strongly recommend that you speak to a specialist

Tectona Tip – there is a strict time limit – 2 years from the end of your accounting period.

5. Make sure your invoices are paid on time

This is such a basic one that we missed this in the first draft! Invoice as early as you can, check all details are correct, regularly remind payment due and chase, chase, chase. Remember, this is your money so don’t get all ‘British’ about asking for payment.

Tectona Tip – have a look at this package, Satago – which has a a credit control function and also discrete invoice discounting.

6. Apply for all available grants

  • Check that you have received your Business Rate grant
  • Apply for Local Authority cash grants designed to help those businesses that have “fallen down the cracks”

7. Take advantage of all payment deferral opportunities

  • Utilise HMRC 2020 Q1 VAT deferral – defer until March 2021
  • Discuss PAYE and other tax deferral with HMRC under Time to Pay schemes – 2 months deferral is usually the max that you will get
  • Request loan repayment and interest holiday with lenders – they are very supportive at the moment
  • Request deferral of rent for office/premises

8. Obtain debt funding

  • Prepare realistic forecasts based on a number of different scenarios
  • Discuss with your bank eligibility criteria, future business growth and profitability
  • Apply for either one of (you cannot have both):
    • Bounce Back (up to £50k) – easy application process, 100% government guarantee and quick response

Tectona Tip: You cannot apply if you are already claiming under the Coronavirus Business Interruption Loan Scheme (CBILS) but if you’ve already received a loan of up to £50,000 under CBILS and would like to transfer it into the Bounce Back Loan scheme, you can arrange this with your lender until 4 November 2020.

    • CBILS (up to £5m) – challenging process and only 80% government guarantee.

Note: If the lender can offer finance on normal commercial terms without the need to make use of the scheme, they will probably do so.

9. Make sure you get any insurance rebates you might be due

  • Contact your insurance broker to see what cash you might get back; most policies have elements geared to turnover and/or payroll cost and both will be well down on the estimates at the previous insurance review
  • Act now and ask your broker to negotiate a reduction rather than wait for a retrospective adjustment – particularly if the policy renewed earlier this year
  • Similarly with fleet and commercial vehicle insurance; mileage is going to be right down and some insurers are willing to reflect this in rebates

10. Approach shareholders for funding (either debt or equity)

  • Stay in close contact with your key shareholders and consider equity raise initially (to preserve gearing) with existing shareholders at reasonable terms
  • If equity is not an option, then explore debt

11. Raise cash from Future Fund convertible loan note

  • Access to loans of between £125k and £5m – on a matched basis – from the Future Fund
  • The loan is potentially convertible to equity at the business’ next investment round

What can I do right now?

It makes sense to keep on top of things.

Tectona recommend regular monitoring of cash – typically on a 7 day, 30 day and 90 day basis to highlight any pressure points which means that mitigation plans can be put in place in good time.

Funders do not like surprises. And they certainly will not look favourably on any last minute, distress requests for urgent funding.
The obvious solution is to plan ahead and get any funding lines needed lined up well in advance.

The Tectona Profit Booster process is an easy way for you to plan ahead and enables you to really explore the financial effects of various strategies in an entirely safe environment; it takes the hard work out of scenario planning.

If you are at all unclear as to how to scenario plan, or how to manage your working capital, then the Tectona Profit Booster process is just what you need.

We can automatically generate robust and accurate forecasts for your business – meaning not only profit and loss account, but also a cashflow and balance sheet forecasts which all link together.

The Profit Booster process calculates useful metrics like your breakeven point, but also how the value of your business is likely to change with any combination of different strategies.

Having identified that, you will need to work out how to plug that hole. You will probably need external funding and Tectona can help you review the funding options available.

Contact the Tectona team so that we can help you work through those options.

About Tectona

Tectona Partnership helps business owners sleep at night by embedding one of our 16 commercially minded CFOs in your management team. Very often, a part time CFO is the most effective solution for smaller businesses.

We make sure you have the necessary management information and strategic insight to make informed decisions. We will tell you what you need to know, when you need to know it.

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