By Rob Adamson, Restructuring and Insolvency Partner, Armstrong Watson LLP

CAN you remember that small window of time when the turmoil caused by the Covid pandemic seemed to be ending and there was the prospect of ‘economic calm’? Sadly, it didn’t last long, as Putin then waged war with Ukraine. This backdrop of uncertainty is causing real problems for businesses in all sectors and the companies that will flourish are the ones that keep a keen eye on their day-to-day performance. In this environment of constant change, it is vital that you are able to react quickly to rising costs, whether that be changing supplier or increasing the sales price of your products or services.

Rising costs are likely to cut profit margins. Your customers will also be feeling the financial strain so may be delaying payments. In the coming months cash will be king. Five key ways to aid the survival of your business:

1. Understand your cash position: Turnover and profits are important, but knowing what your cash position is helps drive decision making and can be the difference between whether you survive a crisis or not. Prepare a cash flow forecast to establish the cash requirements over the next few weeks and months, and help you deal with any delays in the supply chain.

2. Stay on top of your debtors: Any overdue amounts must be chased immediately. Consider putting the customer on ‘stop’ if they are late paying. In times where you may be supplying a product that is scarce, you may even be able to negotiate an upfront deposit.

3. Examine all your costs: Cost control is vital. Go through all your costs line by line to see if each cost is required to achieve your turnover.

4. Manage your creditors strategically: Always try to negotiate the best payment terms with your creditors. If your cashflow projection shows a shortage then communication with your suppliers is vital.

5. Get rid of outdated or excess equipment: Cast a critical eye over your equipment. Is it necessary to maintaining turnover? With so many hold-ups in the supply chain for capital equipment you may be able to sell items at a premium or it may be worth considering leasing rather than buying assets.

In summary: The delays to the supply chain and general uncertainty will likely have an impact on most business’ cash position. Monitoring your cash position and looking forward will help you to ascertain whether you need additional support, either in managing your cash or in reviewing your working capital requirements.

If you are worried about your business’ cash position, get in touch on 0808 144 5575 or