Home Business NewsBusinessBanking News Supporting cashflow in uncertain times

For some businesses, coronavirus has caused a crisis of cashflow. Mark Amis, regional director for London at Lloyds Bank, discusses how the city’s firms can put themselves in the strongest possible position as we enter the new year.

London entering Tier 4 has been another blow to businesses across the capital, with many – particularly in the hospitality and retail sectors – forced to keep their doors closed.

The tougher measures and uncertainty surrounding the virus will continue to challenge firms for some time yet, making it difficult to plan ahead. This follows a tough 2020 and largely lost Christmas period.

However, there are some steps that London businesses – particularly those currently closed – can consider to gain a better understanding of their working capital position, and strengthen their balance sheets as much as possible.

Forecast cashflow

For many local firms, demand for goods and services will have fluctuated during recent weeks, and like the current restrictions these fluctuations look likely to continue for some time. As such, agility is going to be key – for example in areas like staffing and stock levels.

Firms should be modelling for different scenarios, which will help them to determine whether they have enough cash to cover operations at varying levels of demand and capacity. This will also help them to understand how their cashflow position may need to change in response, teeing them up to spot potential crunch points and work to address these early.

Tech-enabled payments

For shops across London, it is worth considering how digital payment methods can be adopted to help them quickly and securely receive payments. While enabling contactless payments has been the first step for many consumer-facing businesses, some local firms will have a higher average transaction value than £45, so alternative solutions are required. Payment methods can include payment by URL, WhatsApp, SMS or QR code, which take the customer to a webpage where they can securely make the payment through their smartphone.

These methods can also benefit businesses unable to fully re-open for some time, such as those in the hospitality sector providing a takeaway offering, by enabling them to trade even without the customer being physically present.

Financial tools

Supply chain disruption has been widespread throughout the pandemic. Back in September, 60% of London firms told us they had experienced supply chain disruption as a result of COVID-19 – a picture unlikely to have changed since. Lots of businesses also said they had experienced a delay in payments from customers.

Factors like these can put incredible pressure on cashflow at an already-difficult time, but specialist financial tools are available to help. For example, invoice finance allows companies to access up to 90 per cent of the value of an invoice within 24 hours of it being issued and can provide a useful boost to cashflow during periods of uncertainty.

There will undoubtedly be further challenges ahead for local businesses but by taking the time to plan ahead and exploring the different tools available to support them, they can ensure they are as prepared as possible for the early months of 2021.

As part of our ongoing commitment to helping Britain prosper, we will remain by the side of the London business community to help them navigate the new challenges they face.

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