The Importance Of Cash Flow

How Cash Flow Planning Can Help Your Business Recover From Covid-19

For business owners, one of the hardest questions posed by the outbreak of Covid-19 was “How long can we last without cash flow?”. 

To quickly adjust for the difficulties ahead and with cash flow forecasts being a required part of the application process for government-backed loans, many found it necessary to take a good hard look at their budget.

In this instance, cashflow planning has prepared businesses for the impact of the pandemic. But it’s much more than just a tool in a crisis.

cash flow

The Importance Of Cash Flow

For accountants, the need for cash flow planning is self-evident whether we’re dealing with a global pandemic or not. This is because we understand that cash flow is the most common reason for business failure.

Furthermore, 2021 is set to be extra tricky for business owners with deferred VAT payments, an end to furlough support and bounce-back loan repayments to plan for.

To help you plan you can find all of the dates for your tax diary below.

Dates For Your Tax Diary

In light of all this, it’s important that the budgets and forecasts you prepared at the outbreak of Covid-19 should be adjusted to the medium-term.

In planning your cash flow, you may find yourself in a position to be a bit more optimistic. Or you might find that the challenges remain and you need to be cautious. Either way now is the time to plan for a time where the economy shows signs of picking up.

Planning For Recovery

Cash flow planning assists you when re-defining your business goals and helps you to begin putting into place the building blocks that will see your recovery from the pandemic.

Building a cash budget, month by month, starting with a balance brought forward from the previous month is a great way to identify any variations and give you a starting point for setting long term goals.

Begin setting goals with the endpoint in mind. Identify the aspects of your business that will see improved efficiency, business growth or both and work back from there. 

Your cash budget will help you to understand if your business has the means to generate enough cash or if more capital is needed to achieve your goals.

cash flow

It’s Not As Difficult As You Might Think

For small businesses, in particular, the idea of financial modelling and ‘what-if’ planning may seem counterintuitive. Especially if they are used to running their business instinctively.

But in such unpredictable times, any business that plans on ‘winging it’ is playing an extremely risky strategy.

The truth is that results in business are almost always planned. And creating a plan is not as difficult as it used to be.

Cash flow planning tools are widely available on the accounting software that businesses have transitioned to as part of Making Tax Digital. These tools make it easier than ever to manage cashflow.

We Can Help

If you can see how your business can benefit from cash flow planning but don’t know where to start, our financial planning experts are happy to help.

At KA Farr, not only to we offer a range of services including business advice & cash flow planning, we can help you with advice and resources that will help your business to succeed.

Give us a call on 01704 211434 or drop us an email at info@kafarr.co.uk to kick-start your recovery. 

We’re waiting to hear from you.