One of the many challenges for businesses post lockdown is about being lean but not mean.
What am I trying to say?
I am talking about balancing cashflow and the affordability to resource with customer and employee satisfaction.
Many business owners have had staff on furlough and are trying to get the timing right in bringing those staff back to work, whilst others are debating how much temporary resource they might need and when.
So how does this impact on both Customer Satisfaction and Employee well-being?
Two examples I have seen this week
Customer satisfaction: I am currently going through a house purchase. Our buyer changed solicitor mid-way through the process as the firm had furloughed so many people, he couldn’t get the service he needed.
Employee well-being: A client of ours was telling us about her husband who is being asked to carry the work of his department of three, working twelve-hour days to keep up. The firm can then maximise their use of the furlough scheme.
In both these examples firms are clearly trying their best to manage cash to preserve their future. However, the outcome is not good for the business with the first example meaning the solicitor lost the work. In the second the employee, already drained after everything we have all gone through in the last few months but sadly due to worries about job security is expected to accept increased workload.
What can you do to get it right?
Plan, plan, plan
Of course, no-one knows what the future holds right now and what the recovery will look like, but you still need to try. Doing so will help to estimate the optimum time at which you will need more resource. My advice; –
1.Make your best estimate on what income will look like
2.Assess the staffing capacity you need to service this well
3.Understand the trigger points in advance on when you need to bring additional resource in to service customers and ensure employee well-being
Consider Capacity requirements
• If you have used the furlough scheme, take advantage of its flexible nature. Remember you can bring people back on any working pattern now so assess what is right for you. Consider is it more efficient to bring people back for one day and get everything done for the week ahead or is a few hours per day more appropriate.
• If you use temporary or outsourced resource, then talk to them. Make the situation collaborative and talk about what you need, try to be flexible to ensure they can perhaps top up with work from other sources.
Once you’ve looked at what income you might get, and the resource required then look at your cashflow. What does that mean for you as a business, do you need additional funding to get you through the next few months.
The balancing act
It is very hard being a business owner right now.
We are all trying to manage cashflow as best we can in uncertain times. A little bit of planning will ensure you can look after your employees, your client and your bank balance.
Be lean but don’t be mean.
Remember your swimming badges at school. My least favourite was the one where after you had already swum multiple lengths and dived for a brick you still had to swim a length in your pyjamas. I remember feeling tired, my swimming stroke wasn’t particularly strong and the weight of my wet pjs made the last bit pretty tough.
I think a lot of us feel like that now, having got through the last few months and fortunate to still have a business, we now must turn our attention to making it post-lockdown. We all feel a bit beaten up by it all so below are a few tips to get you energized and ready to tackle the post lockdown period.
We are all in a growth phase now as we rebound from this period, but this is different from when you started your business and grew from nothing. Now you can use everything you have learnt from the first time you did it and grow faster and more profitably.
My two key questions to consider;-
Who you want to sell to?
Is it the same people you sold to before or do you now better understand the profile of customer you want to work with? Think about the size of customer, the sector they are in, the location or even the number of decision makers you have to deal with.
What do you want to sell?
Do you know which of your products or services are the most profitable? Can you drop services you didn’t enjoy delivering, have you pivoted during lockdown and have great new offerings to get out there?
Do you know the maximum capacity you could deliver right now based on your existing cost base?
It’s important to understand this and compare it to what you are delivering and think you may be able to in the coming months.
If you realise you are currently over- capacity, then consider
-Use of the flexible nature of the Job retention Scheme from 1 July. Understanding what staff you need now is key and knowing your trigger points in terms of sales vs capacity, so you bring people back at the right time.
-Unfortunately, you may need to make redundancies now to preserve the long-term future of your business. If based on realistic sales this is necessary, then do not take too long making this decision.
If you are under capacity because business is going better than anticipated, then think about whether you really need to employ or are you better surrounding yourself with a network of good quality freelancers. The second option puts less pressure on fixed cots during what may be a volatile time.
In such an uncertain time there is no getting away from the fact you need to forecast your cash flow.
Factors to consider
Income – So hard to really know what will happen- will recovery be U or V shaped- who knows. Start with your best guess based on what you know now.
Costs – Ensure you build back in any costs which have been reduced during this period e.g. rent reductions, other premises related costs. You may also want to build in costs to help you re-build such as advertising or marketing.
Loan repayments– any loan repayment holidays may be about to expire so ensure you have considered these.
Tax deferrals – If you deferred Vat as part of the Vat deferral scheme ensure you rebuild in repaying this before 31 March 2021.
Sensitivity – Now you have done all this look at how sensitive you are to change – if sales were 10 or 20% lower than you have forecast what impact will that have on your cashflow
Financing – Now you know your position consider if you have the right financing in place.
So deep breath folks, we made it this far. You built your business before and all of this will help you to build faster and more profitably second time round. Plus the bonus is you can do all this planning in your pyjamas.
In this 40 min video, learn:
- Immediate steps you should take as business owners
- An overview of government assistance (loans, grants, SSP, tax payment deferrals)
- The business interruption loan. Should you take it?
- What we know so far about provisions for the self employed.
Watch the video
We’ve collated a host of advice and resources related to Covid-19 and the financial support available to businesses and individuals. You can read all our latest guides and articles here.
It’s the end of January and whilst the waist band might be a bit looser than the start of the month your cash flow is getting tighter. For many it can take a couple of months in to the New Year to feel like you are back on track and in the meantime it’s just a balancing act to keep things ticking over. So now is the time to think about why it’s always like this in January and what you can do to avoid the pain next year. Some common reasons that I’ve seen clients experience are below and some thoughts about what you can do about them
My client didn’t pay me before Christmas….
If your client didn’t pay before Christmas think about whether they are slow payers all year round or just in December. I’ve felt the pain from mid-December when you just can’t seem to get hold of your client to discuss a payment date. Worse still they promise to pay and by the time its failed to arrive they have closed for Christmas.
Be pro-active and think about what you can do to try and improve this cycle. If it’s a big company it’s always good to find out when their regular payment runs are so you can adapt the timing of your invoicing to meet their schedule. Just bringing forward any monthly invoicing a couple of days could mean you meet their payment run and get paid 15 or 30 days earlier.
If you are dealing with a smaller business, then just talk to them and explain the pressure the delayed payment is putting on you. Honesty from your side may result in them being more honest with you. It may be you can agree a payment plan to clear a larger debt or just a regular monthly payment to keep them on track with on-going work.
January is always an expensive month
January may mean a Vat payment, the rent is due or the dreaded personal tax bill is higher than you thought and so cash flow is always tight.
Be pro-active and plan your cash flow. If it is the case that due to timings January is always a stretched month then it’s time to do some high level planning. Can you spread some of your costs throughout the year, can you get more clients on regular payment plans or do you need to think about your funding requirements. Planning the year ahead for your business will help you identify when these pinch points are going to arise so you will see them coming far earlier and be prepared.
I’m growing I need to invest
You may be growing your business which requires investment. Detailed planning will ensure you know how much you need and how long the pressure will be on so you can get the appropriate funding at a cost you can afford from the start. This enables you to focus on the challenges of growth knowing you have the cash behind you to support this and you can get on with making your business the best it can be.
If cash flow is tight and you want to have a chat about how you can ease the pressure, then drop me a line or give me a call.