It is essential that forecasts are updated to reflect the current status of business operations and any restrictions being experienced through:
- Customer / sector specific issues
- Operating capability / capacity
- Employee absences
- Candidate availability
Corporates should include monthly profit and loss and cash flow forecasts and a rolling 13-week cash flow that is revised weekly or when new material developments occur. It is also vitally important to determine the anticipated level of cash headroom and point of minimum cash position and build in sensitivities to look at range of possible outcomes and the impact this has on requirements.
Working Capital and Cash Flow
It is vitally important to implement measures that will improve the working capital cycle/profile of your business. These could include:
- Agreeing special terms with customers
- Increasing the efficiency of your creditor payment policy
- Enquiring about the availability of Time to Pay arrangements with HMRC
Management teams should consider the assumptions around the invoicing of current and future months’ sales and any issues anticipated with collection. For instance, the Human Capital sector is a key beneficiary of invoice discounting facilities, therefore, it is key that a proactive and open dialogue is established with your respective funders to manage your working capital requirements during this critical period.
Debt Servicing
Corporates should hold proactive conversations with funders to understand the current flexibility around repayment profiles for capital and their ability to defer or reduce interest payments. Proactive communication and effective stakeholder management is key and will ensure that there are ‘no surprises’.
COVID-19 Plan
A concise and well thought out COVID-19 plan should be prepared, which succinctly summarises the challenges facing the business, highlights key strategic, financial and commercial actions being taken by management, identifies any shortfall in funding needs and makes a robust case demonstrating the ability to service additional requirements under a range of scenarios.
How Gambit can help?
Gambit’s dedicated Human Capital and Debt Advisory teams are in constant and direct contact with key industry bodies, mainstream funders and alternative finance providers to understand the latest guidance and support available. We are fully up to date with all forms of financial and practical assistance being made available and can tailor your company’s specific circumstances to the most appropriate solution(s) available.
Our advice to clients is to act sooner rather than later in assessing requirements and putting plans in place. Whilst not all details have been made available as to how some of the schemes will operate, it is evident that companies who are fully prepared and “ready to go” will be at a clear advantage.
Our strong advice on CBILS is, given the loans have no arrangement fees or early prepayment fees and are interest free for 12 months, that clients actively look to access this funding for contingency purposes and if the loan proves not to be required repay it after 12 months at very little cost.
In terms of practical help, we can assist management teams and shareholders with the following:
- Co-ordinating the preparation of a robust set of financial projections which reflect:
- Current trading assumptions
- Short-term known changes
- Contingency planning for “what if” scenarios based on key business drivers
- Assessing short and medium-term working capital needs and co-ordinating and stress-testing various scenarios to identify funding gaps and range of outcomes
- Preparation of COVID-19 plans which clearly set out the commercial and financial risks to the business and the mitigating actions taken
- Co-ordinating the preparation of submissions to funders covering the liaison with existing and alternative providers of funding to identify
the range of funding solutions available - Work with management teams and shareholders to evaluate the available options, review and challenge to determine the optimum
solution - Available as a strategic sounding board at all times to the management team and shareholders to identify key commercial issues and sense check strategic responses .
If you would like to set up a call to discuss the challenges facing your business, understand the most appropriate funding options available and best practice in presenting your COVID-19 plan to your stakeholders, please contact Geraint Rowe, Partner, Gambit Corporate Finance LLP:
T: +44 (0) 845 643 5500
M: +44 (0) 7899 928029
