“Cash is king” is a well-established concept and a commonly-used phrase, which is arguably more relevant now than ever before. The importance of cash flow forecasting cannot be understated; it enables you to identify potential shortfalls at an early stage and adapt your operations to suit the situation.
If your revenue has dropped and you want to apply for financial help via the government-backed coronavirus business interruption loan scheme (CBILS), or for other finance, your bank will need a cash flow forecast. To help businesses, Hazlewoods has created two basic cash flow projection templates which are available to download below.
Once you have gathered all the relevant information, populate your cash forecast with your best-case and worst-case scenarios to establish what your cash shortfall will be in each and use this information as a basis on which to make a sensible application for loan finance. Best guess anything you are unsure about, as no forecast will be exact in these difficult times.
Depending on your business model, you may initially see a cash improvement as your debtors continue paying whilst your costs reduce. It will be crucial, however, to make sure you have enough cash remaining to allow for any sharp working capital expansion when the current trading restrictions relax.
It is important to note that everyone’s business model differs but, for most, the pinch points will come if and when business picks up again as your working capital will have been eroded. You will need to take into consideration the payments of items such as delayed VAT and corporation tax.
The finance community remains active and cash resources are available, including the traditional mainstream banks, as well as challenger banks and private equity.
If you would like any assistance with cash flow planning or want to discuss your financing options in the short, medium and long term, please get in touch.