Our Partner, John Foley was recently interviewed by Sandra O’Connell from The Times for their article “Shine a light on your SME’s cash flow by bringing in financial expertise”. John discussed recommended actions that businesses should take for restarting after the Covid-19 lockdown. This blog post contains the article that was published for The Times.

Shine a light on your SME’s cash flow by bringing in financial expertise

By Sandra O’Connell

This was set to be a big year for Harte Outdoor Lighting. The outdoor lighting specialist had been growing in the home market and, helped by attendance at horticultural shows such as the RHS Flower Show at Tatton Park, near Manchester, it was planning to expand in the UK and France.

Now the focus is much closer to home — cash in, cash out. Good cash-flow management is going to be critical to getting through the coming months, according to Jack Harte, whose parents set up the business nearly 40 years ago.

“We closed for Covid at the end of March and stopped production, but because we had some stock built up we started to sell it online through Amazon, to help keep cash-flow going,” he said.

He used the hiatus to design a new Perspex screen solution for bars and restaurants. “But everybody is playing the waiting game before reopening, to see if social distancing will be two metres or one metre. We’ve orders in the pipeline but they’re all dependent on X,Y or Z happening. The whole industry is in flux,” he said.

“Prior to Covid we were flying it. Now we’re just trying to get a feel for potential demand. Cash-flow planning is hard with such uncertainty.”

However, with a recessionary credit crunch expected, good financial management will be vital. That is why Enterprise Ireland has launched a €5,000 grant for its client companies to seek intervention from an external financial planning consultant.

For others, a good-value alternative is to hire financial expertise on a pay-as-you-go basis through Chartered Accountant Interim Managers (CAIM). It is a network of experienced financial experts, all of whom have a minimum of 10 years’ experience, who can be paid on a part-time basis, even by the hour.

“A lot of business owners are panicking, having been closed for a few months. The first thing to do is sit down and work out a plan to engage with staff, customers, suppliers and financiers,” said Peter Callan of Callan Consulting, a member of CAIM.

In any recession it is vital to keep as much cash in your system as possible. To this end, look at everything from personal pension contributions to loan repayments and consider which ones could be paused. At the same time, start invoicing earlier and more often to bring cash in. “All these small things make a big difference,” Callan added.

It is advisable to negotiate revised payment plans with creditors — but be cautious. “Be very careful you don’t commit to something unless you are absolutely sure you can deliver on it. The old ‘cheque is in the post’ line doesn’t cut the mustard in a situation like this. Credibility is king,” said Callan.

Liquidity boosting supports are available from local enterprise offices or Enterprise Ireland, under certain qualification criteria. Ensure you get a finance expert to prepare the documentation.

If you have not been through a recession before, the current situation is frightening, but no small businesses should attempt to “wing it”, Callan advised. “It’s a very tricky period, and the key is to have good information, get a good plan together, and then ask for help. Even though it can be hard to ask, help is out there.”

Now is a particularly fraught time for the hospitality sector. “They are trying to reopen but without yet being sure of the level at which they are able to reopen, or what kind of demand there will be,” said accountant John Foley, a partner with MK Brazil in Waterford.

Regardless of sector, he advises small businesses to strengthen debt collection by following up invoices with reminder statements and phone calls more quickly. “Be systematic,” Foley added.

If you have bank finance, lease or hire purchase agreements, now is the time to seek payment holidays. “It will give you a bit of breathing space, even if you can afford to make the payments,” he said. The deadline for first-time applications to banks for repayment holidays runs out on June 30.

Revenue supports include the option of “warehousing” tax liabilities for a period of 12 months. “Even if you have the money, park it in a ;number two’ account, which you have access to if you need it, because once it’s gone you can’t get it back and you don’t know what your cash position will be going forward,” said Foley.

Restart grants, equal to your commercial rates bill from 2019, are available through local authorities, subject to qualifying criteria. “It’s a cash injection, so an obvious one to go for,” he added.

It is also worth applying for credit approvals from invoice discounters. “It’s only expensive if you use it, and if you use it, it’s because you need to. It’s flexible and it’s driven by your activity, so put it in place,” Foley advised.

When the government’s pandemic wage supports end, many business owners face difficult decisions regarding staff. “Everything is in a state of suspense at the moment. You need to have your mind engaged about what your options are. Right now, it’s hard to gauge demand. Many could see a bump because of pent-up demand, but that might then taper off.”

Covid-19 has not just put a dint in demand, it has added to costs.

Teams that previously worked two to a van will now have to travel separately, said Denis Reeves, co-chairman of CAIM. Offering early payment discounts to bring in cash “could be the difference between staying alive and closing down”, he suggested.

It is recommended that you examine your customer list. If you have any customers classed as essential services, and who therefore traded through the lockdown, make them a priority for cash collections.

It may be an option to take part-payments to boost cash flow, and do deals with suppliers to extend your own payment days, from 30 to 45, he advised.

Gavin Coyle, of safetyfreelancer.com, secured part-time chief financial officer services from a few days a month through CAIM. It has paid dividends.

Better financial planning made the business more resilient. It “provided us with a financial model for our business”, said Coyle. “We got on top of our productivity by applying it, because people are more involved in what they should be doing and not fighting fires.”

Despite the pandemic, the business is now “more steady and consistent than it ever was”, he said. “Where previously we were winning work and pricing it off the hoof, now we know we need to hold our rate, or else have a solid business case to changing it, such as, ‘These guys [customers] pay every month.”

Article Courtesy of The Times – O’Connell, Sandra, Shine a light on your SME’s cash flow by bringing in financial expertise (21 June 2020)

We hope you find this cash flow advice from John useful and that your business gets back to trading as usual as soon as possible. Please feel free to contact us on 051 840800 or email us at info@mkbrazil.com if you have any questions about our services.