Responding to Coronavirus: Unlocking cash from your balance sheet

The uncertainty of the current situation surrounding coronavirus (COVID-19) is affecting businesses in a number of different ways. Despite the support offered by the Chancellor in last week’s Budget, many SMEs remain particularly concerned about the impact that the pandemic is having on their cashflow.

With a significant liquidity squeeze a very real prospect for businesses across many sectors of the economy, there are steps that leadership teams can take now to bolster their balance sheets and protect their cashflow:

1. Plan ahead

The situation is evolving rapidly so it’s important that you continue to have a good idea of where you stand amid all of the uncertainty. Keep updating your cashflow forecast as new information becomes available and pay particularly close attention to your list of debtors.

2. Keep in touch

Stay in contact with your debtors to find out how they’re getting on and to anticipate any potential problems. Regular communication can also help bolster your relationship with your clients, which is particularly important at a time of financial stress. Our experience suggests that the old adage of ‘a stitch in time-saving nine’ is particularly relevant when it comes to debtors, as a tricky conversation early on can prevent a potential issue from snowballing into something much worse.

3. Be firm

Make sure that you’re very clear in your conversations with debtors. If you’ve delivered on your side of the contract, the default position remains that you should be paid – and paid on time. Cash is king in the current economic climate, so try to resist the temptation of writing off (or waiting for) what you’re owed. It’s also worth remembering that delays to payments by your debtors could risk a knock-on effect further along the supply chain, as you may then struggle to pay your own creditors on time.

4. Be fair

The reality is that many businesses are going to face pressures on their cashflows over the coming weeks, so consider introducing some flexibility when dealing with some of your most trusted clients. If you have a good understanding of your financial position (see point 1 above) and have spotted potential issues early (point 2), you may be able to agree an alternative repayment schedule with some of your debtors.

5. And if you’re not getting anywhere…

If you feel that you can’t come to an agreement with a debtor, it may be time for expert advice. This is exactly why we created Escalate. If you suffer a financial loss because of late or non-payment, don’t automatically assume the costs of recovery outweigh the benefits. We’re already helping SMEs to recover £100 million that would have previously been written off, with a simple sign-up process, no up-front costs and a fee-only payable if we get you your money back.

If you would like any further information or guidance please contact us using the below form:

We always recommend that you seek advice from a suitably qualified adviser before taking any action. The information in this article only serves as a guide and no responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or the firm.

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