How to maximise cash as Brexit approaches

Brexit, Cashflow & Forecasts, Planning, Videos,

Our 1st March Digest recommended that clients maximise cash in the run-up to Brexit day, but how do you do that? What do you need to think about and where do you start? We’ve been asked for some recommendations, so thought we’d include them here for you.

Watch this for some ideas and suggestions that will help over the next few weeks and into the future too. Any individually will make a difference, but if you apply them all, you’ll notice a real difference in your cash position!

Transcript:

Hi and welcome to another episode of BaranovTV, designed to demystify the world of accounts and tax and to help your business grow.

We send a monthly digest out to all of our clients and contacts which summarizes the business news, blog posts, BaranovTV articles, and things that have been going on in the proceeding month. We do that because we know that everyone’s busy, and it’s quite likely that people have missed some of that content over the month.

In the digest for the first of March was an update on what we think clients should be thinking about as we get closer to Brexit day. Now, there is, at the moment, very little concrete guidance as to what you can actually do around Brexit. So we’ve summarised the kind of things that we thought would be important.

One of our recommendations is to maximise cash within any business.

This will provide a buffer should decision times lengthen or if the economy slows. Since then, we’ve been asked what actions people should be taking.

In this episode we’ll go through some ideas of how to maximise cash in a business.

Brexit day is due to be on the 29th of March, so these are things that you need to start thinking about really quickly if they’re going to make a difference. However, they will make a difference to your business anyway so setting aside Brexit, if you can put some of these things into practice within your business, you will see an improvement in your cash situation.

Work your list

If you have a list of existing customers or clients, previous customers or clients, or of prospects, then start to work that list. Start to send out regular emails to them. Remind them what you do, the different products and services that you have.

Think about making an offer

If cash is tight, you might want to send out an offer to your list that actually encourages them to buy from you and buy from you now rather than putting off that decision, so always include a deadline. You might want to give a percentage off. Bear in mind, if you do, that that’s going to affect your profits, so make sure that you’re doing that on products or services where you make a good profit and make sure that you work the numbers before you go ahead and decide what percentage to give.

The best offers are ones that increase their average spend, so you could bundle things. Add things to the sale that don’t potentially cost you very much, but have a value to your customer. So think about those sorts of things.

Get to the money earlier within the cycle and the sales cycle.

This would include things like deposits. A lot of businesses that we’re speaking to have never charged a deposit. They start with a small amount, a 10% deposit, and slowly, as they realize that new customers really don’t think about it and don’t think that’s anything unusual, they start to increase the size of that deposit. So 10%, 15%, 20%, up to 50%, payment upfront.

It’s all within your ability to tell your customers that that’s your terms of business. Do make sure that they are reflected in your terms of business. Make sure that they’re clear upfront and that you get those signed wherever possible.

Think too about stage payments. So it could be you’ve done half the work; ask for half the money. It gives you an opportunity to increase your cashflow and improve your cashflow.

Think about HOW you get payment from your clients and customers.

All of our clients are on direct debit which means that there’s very little admin for either party which means that everyone’s lives are improved AND it means that you’re not chasing debtors. Make payment easy and make sure customers know how to make payments. Include your bank details on your invoices, and on any reminders to minimise delays. It is also possible to take credit or debit card payments very cheaply now, without a merchant account.

Debtors and overdue payments.

You should have a very structured debt chasing process. If you have any debtors, you should have a clear process and everyone in the business should know that will apply. Xero and QuickBooks and other software have automatic reminders within them of differing degrees; if you start to get those running you’ll find that people who genuinely forget to make payment will be prompted.

Once those have gone then you need to ramp up your efforts and you need to start making those calls, following up with emails, and just making sure that those clients and customers know that they can’t get away with not paying you.

Working capital.

You should also consider working capital, and this one is really important now. What would happen within your business if your payments didn’t come in as promised and sales dipped?

You need to consider whether you’ve got enough cash to get you through those bumps. A lot of businesses are seasonal, so if your seasonal dip comes early, lasts longer, and is deeper, can you manage? Because there is a lot of speculation suggesting finance won’t be as easily available as it is now, after Brexit.

Make sure that you know your numbers, you know where the gaps may be, and you know what you may need to make an application sooner rather than later. There are alternative finance options out there that you may not be aware of, that you may not have used before.

The British Business Bank have said that 1.7% of UK’s 5.7 million small businesses applied to banks for a bank loan in the last year. In the same period, asset finance and peer-to-peer lending, so things like Funding Circle, increased dramatically. So we are starting to see a real change in the options for finance.

If you need finance and you’re not sure where to look, then do get in touch, and we can give you some ideas and some suggestions.

 

There are also other things that you can be doing, that will differ on a case-by-case basis and business-to-business basis. So if you’re unsure, then please do as other people have done and get in touch. We can give you some options, look at your business and help you.

This was a whistle-stop tour of the things you could be doing to improve your cash position in the run up to Brexit and beyond. I hope it helps! Any problems, do get in touch, and I’ll see you all very soon.