Cash flow management Deloitte

By Martyn Gregory, senior partner

Martyn Gregory, who leads Deloitte’s corporate finance advisory team in Wales and the South West, looks at cash flow management post-lockdown, and how it can be a challenge as well as an opportunity for a business.

Understanding and managing the impact of COVID-19 on our lives and business in Wales will take some time. It remains clear, even post-lockdown, that COVID-19 will remain a dominant influence for the immediate future, and many businesses will be facing some key challenges as well as opportunities, one of which will be managing their cash flow.

We think of the post-lockdown period, even with its uncertainties and retained restrictions, as a ‘recovery phase’ for most businesses. For some, this will result in a relatively straightforward period where business returns to normal fairly quickly; but for a good many others, particularly those in the hospitality sector, the recovery is not as clear cut.

Rigorous cash-flow management

It will be essential that businesses continue to adopt rigorous cash flow management to ensure that their recovery is robust, sustained and enables conversations with key stakeholders, for example their customers, suppliers, lenders and employees, that take place on a positive, forward looking basis.

Communication is key

It is likely that customers and suppliers themselves will have been affected by lockdown, and so it is not a given that pre-COVID-19 payment terms can easily be returned to in the short term. Communication is key – early conversations with customers to understand their position will permit effective planning and no surprises in relation to delivery of goods or services and receipt of payment. Similarly, discussions with suppliers with a view to ensuring continuity of supply may reveal where support may be available in the form of extension of credit terms.

Preparing regular forecasts

Where PAYE, VAT and other taxes have been deferred, these will need to be repaid at some point, so it is important that these are factored into the medium term cash forecasts, but as a minimum we would recommend that business owners prepare and refresh weekly cash forecasts for at least a four week period, with monthly forecasting for 6-12 months after that so that pinch points can be identified, and where necessary, early notice to lenders of any increased credit requirement given.

Adjusting to the new normal

Currently, my team and I are working closely with clients to assist them with their cash flow planning, and we’re able to call on the support of experts in our tax, restructuring and corporate finance advisory teams as the need arises.

We continue to support Welsh businesses to emerge successfully from lockdown and thrive in the current circumstances. Adjusting to the new normal presents a range of challenges but also opportunities for many businesses. You’ll find useful insight in our post-lockdown framework document, where colleagues and I outline our perspectives on:

  • anticipated challenges and opportunities for businesses
  • looking to the future and the evolving market in corporate resilience, social attitudes, financial environment and technology and data
  • questions business should ask themselves with regard to employees, customers, suppliers and funders

as well as guidance on setting a strategic direction and items for the agenda when business planning.

Martyn Gregory Deloitte

Martyn Gregory, Senior Partner, Financial Advisory

Martyn Gregory is a senior partner at Deloitte and leads the firm's South West and Wales practice. A corporate finance partner, he has extensive experience of advising large listed businesses and privately owned companies and has advised on over 150 projects and transactions during his career.

To connect with Martyn and his team, email mgregory@deloitte.co.uk.

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