In December 2019 and after 3 years of uncertainty, thanks to Brexit, finally a strong government had been voted into office and, whether you agreed with their policies or not, the economy was starting to bounce back. Who’d have thought that 3 months after marking our voting paper back in mid-December that shops, schools and offices would be shut indefinitely and anyone who didn’t work for the NHS would be stuck at home, apart from essential food shopping or a single daily outing for exercise. Covid-19 has made an impact few of us could have ever had imagined was possible. It is frightening how quickly and deeply some UK sectors have been hit by the draconian policies required to mitigate the devastating effects of Coronavirus. Shops, gyms, restaurants forced to close with no opportunity to make money, having to at best furlough or at worst lay staff off. The government has offered unprecedented levels of financial help to aid businesses through but only time will tell if anyone will make it. Most companies in travel, retail and leisure would look at our business model in envy, after all we are a technology firm with a cloud software-as-a-service (SaaS) solution with regular monthly and annual subscriptions. But our main clients are from the construction industry, renowned for its boom and bust economic cycle and Covid-19 certainly has the potential to push the industry towards bust. As we started to see how serious an impact the Coronavirus may have on the economy, we, as Directors, came up with three key areas to focus on. 

Keeping in touch The first negative feeling of running a business remotely is the loss of control. The department I manage is sales and we would meet once a month to discuss the plan and review the previous month, although we would be in regular touch through the office or while in meetings. The first thing we did was to instigate a daily 30-minute catchup at 9am. This ensured everyone was ready for action from 9am and we could also continue to plan and monitor progress. As one of three Directors, we would usually meet every 6 to 8 weeks to discuss plans and review costs and revenue. We immediately agreed that we would conference every week to monitor the situation more closely. In situations like this, changes can happen fast, so having our heads together once a week, would ensure we could adapt quickly. 

Money, Money, Money It’s an obvious one but money is what’s going to keep a business solvent. Having a good handle on your organisation’s monetary situation by regularly and accurately reviewing cashflow, what could impact negatively on that cashflow and costs, will ensure you have the basic financial information to then plan how to make that money last and to mitigate any risks of going out of business. To help with this we adopted 3 clear steps; > Monitor > Plan > Mitigate 

Monitor: Firstly, establish key metrics that will impact on what cash you have in the bank; potential new work, existing projects and consider the impact if some of these projects stop or the customer goes bust. Monitor debtors and whether customers are delaying payment or even stopping payment. Using this data, start scenario planning; what happens if 15% of our payments are delayed or we win no new work in 3 months. Review all costs including overheads and staff. Identify key parts of the business that are still generating income or winning new. Look at other parts of the business where costs can be cut and look at how quickly these can be enacted if required. Speak with customers and similar businesses to your own. See how they are coping; quite often you can pre-empt a situation prior to the monetary impact being shown. Prepare a set of metrics that are relatively easy to update and can be reviewed each meeting.

 Plan: Agree on a worst case, best case and most likely scenario based on the metrics monitored. Establish a plan, that may include cost cutting, for each of these scenarios. Have all the preparation work done, so if a scenario needs to be enacted based on the metrics you are monitoring, you have all the details ready. 

Mitigate: Enacting the carefully considered plans should minimise the impact on your finances and business. Don’t bury your head in the sand; the problems won’t fix themselves. Act quickly, because the consequences of acting too slowly can be even more traumatic further down the line.

Information is key “An investment in knowledge pays the best interest.” --Benjamin Franklin Research all the options available and keep abreast of extra lending, grants or funding while your business is strong. Companies are always happier to lend when you don’t require it. If your business is starting to fail, help won’t be available or will be prohibitively expensive. Keep speaking with fellow businesses and see how they are dealing with the situation. There may be a key insight you’ve missed. 

Keep an eye out for a new blog next week on cashflow management including our forthcoming webinar to book on as well.