Guides & Advice
COVID-19 | Keeping the cash flow flowing
COVID-19 | Keeping the cash flow flowing
It is an old saying and sometimes overused, but now more than ever 'cash really is king’.
The evolving package of business interruption loans announced by the government including products such as the Bounce Back Loan, CBILS, LCBILS and Future Fund, as well as measures such as the deferment of VAT payments have proved to be vital survival tools and have been welcomed by many of the UK’s large, small and micro business enabling them to ‘keep the lights’ on in many cases.
However cash flow, outside of the current pandemic was always key, but now – it is more important than ever.
How do you keep the money coming in?
- Keep in contact with your customers, make sure you know your customers. Many may well be struggling with their own situations. If you can, reiterate your payment terms, be that 30, 60 or 90 days and make sure you invoice on time and collect on time.
- Do not wait for your payment terms to be reached before checking with your client that your invoice has been received and being processed for payment. As soon as you have delivered your goods or service, check with your customer that they are happy with the widgets and note their comments to provide a detailed record should you experience problems in the future.
- Consider billing some customers upfront and potentially asking for a deposit? Bill in advance, collect the cash and make use of the deferment of VAT options to pay later.
- If you have absolutely key customers, communicate with them and if they are struggling propose a payment plan, if they haven’t approached you already. Things will get better but it is likely to take some time.
- Review your credit policy and ensure all staff are aware of it and what then happens when an invoice becomes overdue. If a customers does not pay after a certain amount of time it may be necessary to stop providing goods or services to them until payment has been made. If this does not elicit payment, this may be the stage when legal action is required to encourage payment.
- If you have a newly established business, or a company with a poor credit score and if you want to deal with them you could consider asking for a personal guarantee. If the director/s are prepared to agree to this, subject to due diligence, this could offer you security.
As the UK begins to take steps towards an increase economic activity now is the time to look at adopting alternative cash collection strategies when faced with customers with financial difficulties. Every business wants to stay in business and your chosen strategy will very much depend on the profile of your customer base.
What is key though is that you identify swiftly and early-on who owes you money and you work with them to ensure you are not the one that unduly suffers from what is a challenging situation for everyone.
For legal support in relation to the coronavirus or any other matter, get in touch with your team today.
We have launched our guide to recovery and resilience, helping to support businesses and individuals unlock their potential, navigate their way out of lockdown and make way for a brighter future. Further advice in relation to COVID-19 can be found on our dedicated coronavirus resource hub.
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