Cash flow planning for a second wave of coronavirus

As businesses look to recover under the looming shadow of a potential second wave of coronavirus (Covid-19), accountants explain how they’re preparing businesses to navigate choppy waters.

Businesses find themselves at an uncertain crossroads. While the lockdown is easing and business is gradually picking up, there is also the possibility of a second wave of COVID-19, which could potentially force them to close down again.

Cashflow planning has become the most important focus for businesses over the past few months and remains a top priority. Accountants’ clients are more aware of the dangers and importance of good cash flow management, but they’re also in a potentially more precarious position than they were before. Accountants are advising them to do several things to make sure they’re prepared:

  • Scenario planning
  • Review of spending
  • Use of technology
  • Tightening credit control

Five accountants in practice explain how they’re approaching the conversation with their clients and sentiment about the possibility of a second wave.


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Now is not a time to take risks –businesses need money in the bank

Samantha Perkin FMAAT, director, Zamu

I’m advising clients to manage their money very carefully; don’t take risks, don’t necessarily invest in your business in a way that you normally would at this point in time. If the money’s in the bank, hang on to it.

There are some practical aspects to it, like helping clients do a spreadsheet. We’re looking at clients’ deferred VAT bills and helping them to work out how they’re going to pay it, making sure they’re putting enough aside per month. Another example is professional landlords that have deferred their rent. They will get that bill and they will have to cashflow it. So they have the mindset and ability to put money aside, or do they just need to pay it now?

I’m going through clients’ spending and asking them: what can you live without? I get it’s going to impact the economy as a whole, but it’s about survival. The good news is that clients are sitting up and taking notice more this time – most are expecting a bad second wave that will happen either locally or nationally at some point, and they aren’t expecting as much help from the government this time.

With a couple of clients, we are doing detailed scenarios using 3 options. These are general guesses. They are all annual growth/retraction and part of budget assumptions. For example:


Period1 – Optimistic2 – Normal3 – Worse 
Sept-Dec 20No change-5%-15%
Jan – March 21No Change-7.5% -20%
April – June 215% growthno change-7.50%


1 – Optimistic  
July 21 – June 22 10% growth (not yet pre-pandemic)
July 22 – June 23 5% growth (return to March 20 position) 
2 – Normal  
July 21 – June 22 5% growth (not yet pre-pandemic)
July 22 – June 23 5% growth (not yet pre-pandemic))
3 – Worse   
July 21 – June 22 No change (not yet pre-pandemic)    
July 22 – June 23 5% growth (not yet pre-pandemic)

Next step: Help clients make a realistic plan for a second wave, and help them improve their resilience as much as possible.

Verdict: Until we’re completely out of the woods, businesses should hold onto as much cash as possible.

The focus has to be on business resilience planning

Alan Hamilton, corporate finance director, Johnston Carmichael

As lockdown continues to lift, business resilience planning has never been more important. We’re working closely with clients to help them review their operations fully, adapt and take advantage of growth opportunities as the economy starts to recover.

Scenario planning will help with the unexpected, for example, what if we have a second wave, what will this mean for your business? Scenario and business planning are crucial in devising a post-lockdown strategy, but also help assess future funding requirements and identify potential opportunities and risks.

Digital plays a key role here too, as having access to real-time information through cloud accounting software and associated apps, allows business owners to make informed decisions based on real-time facts.

Next step: Run scenarios with clients to assess how a second wave might affect their businesses.

Verdict: Businesses should be reviewing their entire operations to gauge how resilient they are.

Businesses should build a ‘war chest’ and maximise profit margins

Matthew Thorpe, managing partner of Haines Watts Hornchurch

With so much uncertainty around what a second wave will mean for business, planning is challenging, with a second nationwide lockdown being the main fear. The immediate focus is on building reserves to draw on in the event of another lockdown.

That means maximising profit margins, tight credit control and well-controlled spending. Having a war chest is the best protection against a second lockdown. The next step is to make sure you aren’t taken by surprise by whatever comes next. Modelling as many scenarios as possible in simple terms is the biggest single area we are investing time with clients.

Next step: It’s all about scenario modelling and getting cash in the bank.

Verdict: It’s tough to plan for, so businesses must do all they can now to build a buffer in their accounts.

Businesses should engage with employees and make sure they can be agile

Stuart Crook, partner at Wellers Accountants

You can only plan for what you can see is likely to happen. Businesses need to ask, ‘what lessons can we learn from what’s happened over the last four to five months to ensure the impact of any potential second wave is minimal?’ 

This includes making sure risk assessments and financial forecasts are up-to-date. Don’t just keep previous financial forecasts and information collated during the previous lockdown on the shelf filed under ‘dealt with it’. These insights and forecasts need to be revisited and recreated to help assess what the new landscape looks like.

“From the employee side, we’re suggesting that clients engage with their workforce through surveys and polls to ascertain views and attitudes. We also recommend that they update their working from home policies as these can really ensure businesses continue to stay agile during future crises. Working from home will cut costs for business so it may be about redistributing these costs and funds into areas that generate the most income.

Next steps: A combination of careful forecasting and review of working practices.

Verdict: Businesses need to learn some fast lessons from the past few months.

Businesses need to work out if they need to adapt or evolve

Sherad Dewedi, managing partner, Shenward Chartered Accountants and Business Advisors

It depends on the business. Ultimately, businesses need a clear plan of how to operate during a second lockdown, whether it’s about adaptation or evolution. We’re telling our clients that, if their business model is able to somewhat sustain itself during a second wave, do they have the right plans in place? Have they done break-even analysis to work out the minimum sales they need to survive a second lockdown?

If that’s not possible, are they able to evolve? We have clients in manufacturing and they’ve pivoted into manufacturing PPE. They also need to have conversations with suppliers, I think they’d be more amenable now, given that it is a pandemic affecting everyone in some shape or form.

Other areas we’re advising them is to approach banks, see if they can get mortgage holidays or a Business Bounce-back Loan, even they don’t have a specific cash requirement now just in case, because once furlough ends in October, businesses will need reserves.

Next steps: We’re telling clients to arrange more favourable payment terms now so that it could help with cash flow in the worst-case scenario.

Verdict: Businesses need to work out if they can survive with their current business model, or whether they need a new one.


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Mark Rowland is a journalist and former editor of Accounting Technician and 20 magazine.

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