Managing your cash flow: download our template for your business

Published: Wednesday 1 April 2020

“Cash is king” is a well-established concept and a commonly-used phrase, which is arguably more relevant now than ever before. The importance of cash flow forecasting cannot be understated; it enables you to identify potential shortfalls at an early stage and adapt your operations to suit the situation.

Hazlewoods Corporate Finance team has created two basic cash flow projection templates which are available to download below. If you have any questions, please contact Rob PlumbRich Grover, a member of the Corporate Finance team, or your usual Hazlewoods contact.

Click here to download our
short-term cash flow forecast template
Click here to download our
long-term cash flow forecast template

 

If your revenue has dropped and you want to apply for financial help via the government-backed coronavirus business interruption loan scheme (CBILS), or for other finance, your bank will need a cash flow forecast. In order to prepare the most accurate 13-week cash flow forecast you will need to consider the following elements.

13-week cash flow forecast

Once you have gathered all the relevant information, populate your cash forecast with your best-case and worst-case scenarios to establish what your cash shortfall will be in each and use this information as a basis on which to make a sensible application for loan finance. Best guess anything you are unsure about, as no forecast will be exact in these difficult times. 

Depending on your business model, you may initially see a cash improvement as your debtors continue paying whilst your costs reduce. It will be crucial, however, to make sure you have enough cash remaining to allow for any sharp working capital expansion when the current trading restrictions relax.

It is important to note that everyone’s business model differs but, for most, the pinch points will come if and when business picks up again as your working capital will have been eroded. You will need to take into consideration the payments of items such as delayed VAT and corporation tax. Find out more here.

Our top tips for completing the cash flow forecast

Incoming cash 

You will need to establish, as best you can, what cash will be coming into the business. There will be a best-case and a worst-case scenario, so it is wise to do two forecasts and evaluate each. 
Here are the steps you should take:

  • Contact the accounts departments of all your major customers to find out what their current payment policy is and whether there are any plans or considerations that may change it in the future.
  • Find out the dates of any payments they will be making and put these in your forecast.
  • If a client has put all payments on hold, make a note of it and record how much they owe you. Evaluate the likely portion of bad debts.
  • If you have any other normal cash inflows, for example, rent agreements, grants, interest etc. evaluate how stable these sources of income are.
  • Consider all the government-backed assistance on offer to your industry and the likely timescales for accessing cash.
  • If you have access to additional private equity funds, make sure you explore this option.

Outgoing cash 

This is the area where you have most control, so make sure you thoroughly explore every avenue. You should have more than enough time if business is slow.

Purchase orders 

  • Process any client orders that you will be able to invoice and for which you will receive payment.
  • Ensure you know when goods have been received by a client and send a bill swiftly. 
  • Wherever possible, cancel the purchase orders of customers who are withholding payment. 
  • Only process new orders when the customer’s account is cleared.

Stock

  • Only order whatever is necessary to hit the ground running when trading restrictions are lifted.

Supplier payments 

  • Based on what you have found out from your customers, decide who can and should be paid and with whom you can negotiate a part payment or a delay. 
  • Inform your suppliers of your decisions so they can also plan accordingly. 
  • Try and protect the relationships you have with your key suppliers – i.e. the ones you need most and also the ones you know might be most vulnerable.

General cost of sales 

  • These should fall naturally in line with your revenue but cancel anything that is not essential.

Salaries 

  • Consider ‘furlough’ options if there is no work to do and consult affected staff.
  • Furlough salary payments still need to be made by the company, but the Government will reimburse the payment via the new coronavirus job retention scheme system. This could take longer than anticipated to organise so you might want to discuss with employees a delay of the normal salary payment date. 
  • Make sure your employees have information about mortgage holidays etc. so they can minimise their own expenditure during this period.

Fixed costs

  • Review all fixed costs and any planned capital expenditure to establish what can be put on hold and what must be paid.

Rent  

  • Discuss rent payments with your landlord. They may be unhelpful, but the Government has banned all evictions from commercial properties for the time being. 
  • Call any other lease/rental providers e.g. photocopiers to see if they would also be willing to give a payment holiday.

Rates

  • Apply to your local authority to see if your industry qualifies for any of the business rates breaks promised by the Government.

Loans 

  • Contact your bank and apply for a loan payment holiday. The banks are being inundated with requests but be patient and keep trying.

Dividends 

  • Restrict dividend payments to the bare minimum once directors have arranged mortgage holidays etc. with their own banks.

If you need help with your cash flow template or making decisions on what steps to take next, please get in touch.