Managing your business finances in challenging times

Coronavirus is dominating all the headlines at the moment.

For small business owners, particularly those in sectors which will be affected most by measures to tackle the spread of the virus, these are worrying times. Travel companies, event planning businesses, pubs, restaurants and other businesses in the retail and leisure sector are amongst those who will be impacted severely. In reality, all businesses will be affected to varying degrees and will need to take steps to protect their short term and longer term prospects.

There is a lot of information out there about how to protect ourselves and others, self-isolating and so on. There is less advice for business owners to help them get through the next few months.

The Government, to its credit, did announce some support for small businesses in the recent Budget. This included some relief on Business Rates, changes in Statutory Sick Pay and support for 'Business Interruption' loans. These measures help a little but business owners need to take practical steps to manage their business finances during these challenging times.

These are my suggested steps for small businesses to prepare for the next few months:

1) Forecast

I think it is really important to forecast profits and cashflow for the next 3 to 6 months. The future is uncertain but we need to make our 'best guess' allowing for predictions of what may happen - restrictions on mass gatherings, school closures, more employees self-isolating or working from home, less discretionary spending etc. What does the 'first draft' forecast show? For some businesses, things may not be too bad, profits may be down but they have reserves and cashflow holds up. For others, the situation may be much more severe - monthly losses and negative cashflow.

2) Consider what you can change

If your first draft forecast looks unsustainable, what can you change? Start with income. Can you do things differently to generate more sales? Then look at every item of cost. What can be eliminated or cut back to ensure cashlow remains positive until we get back to a more stable trading environment? How does the revised forecast look? If things still look bleak in the short term, you may need to look at emergency funding to get you through this period.

3) Consider funding

Where do you go to get help with funding? The first port of call for most businesses will be their bank or their accountant. A bank will probably want to see a profit and cashflow projection and your accountant can help you pull this together. The projection should determine how much funding you need and what type - loan, overdraft etc. It will also be necessary to take a longer term view to ensure that the loan repayments are affordable and the business finances will improve over time.

These are exceptional times and for some businesses, keeping calm and carrying on will not be enough.

From a financial management perspective, I recommend a pragmatic look at your future income and expenses to ensure you can get through the next few months.

If you can, that's great and this will be the case for many businesses. Tough times, but they can knuckle down and carry on.

For those with insufficient cash reserves or financing facilities who are predicting negative cashflows, they need to act now to make some radical changes and seek emergency funding if they need it.

Their future may depend on it.

www.base52.co.uk