It's a statement of the obvious, but at the death its not about turnover or profit, businesses fail when they just run out of cash. Don’t get me wrong, a sustainable business needs to trade at a profit, but at the end of the day its not rocket science, a business can trade until it runs out of cash.
Entering the current crisis most businesses will need to protect their cash position while as far as possible keeping all stakeholders on side. Taking as much help as possible, from as many sources from the outset is key. Funds that aren’t paid away in the first place don’t have to be replaced. Also bear in mind that while Government support is available (see below) it’s probably not going to materialise until mid May.
Here are some general good practices as we head into a downturn:-
When agreements are made ensure there is documentary evidence – just to avoid misunderstandings and to help prevent a change of heart.
While all the above preserves the cash be mindful that where payments are deferred the time will come when creditors will need to be brought up to date so be mindful to record all arrangements and incorporate them in the cash flow forecast.
Having agreed special arrangements its important to honor them to maintain goodwill and confidence.
Finally if it looks like a crisis is inevitable and you need to approach the Bank for support, give as much notice as possible, the problem is unlikely to go away, share the burden. Make sure you go to the Bank with a full information pack (including up to date Management Information and forecasts) and not least a proposal.
David Marshall: E: firstname.lastname@example.org T: 07764 512 840