Supporting cashflow in uncertain times: Fraser Sime business comment

While continued restrictions have been put in place to protect public health across Scotland, it has had a huge impact on businesses across the country, with many – particularly in the hospitality sector – forced to close their doors.

For many businesses, Covid-19 has put real pressure on cashflow. Picture: Jon Savage

Even before the latest tiered system was introduced in November, our Business Barometer report revealed a significant dip in confidence among Scottish firms as they faced the challenges brought by the restrictions.

The Covid-19 restrictions in Scotland are being continually monitored and updated on a weekly basis but it remains unclear whether demand will return in the run-up to the usually busy Christmas period, making it difficult for businesses to plan ahead.

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

Forecast cashflow: For many firms, demand for goods and services will have fluctuated during the past few weeks and months and this is likely to continue for some time. As such, agility is going to be key – for example in areas like staffing and stock levels.

Forecasting customer demand is obviously going to be extremely difficult. However, firms should be modelling for different scenarios, which will help to determine whether there is enough cash to cover operations at varying levels of capacity and how their cashflow position may need to change in response.

Tech-enabled payments: For shops across Scotland, it’s worth considering how digital payment methods can be adopted to help them quickly and securely receive payments.

Enabling contactless payments has been the first step for many consumer-facing businesses. Contactless has the bonus of being more Covid-secure too as people aren’t handling shared equipment. Some however 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 pay via their smartphone.

These methods can also benefit businesses that remain unable to fully re-open, including those in the hospitality sector providing takeaway options, by enabling them to trade even without the customer being physically present.

Financial tools: Supply chain disruption has been widespread throughout the pandemic. In October, 34 per cent of Scottish firms told us they had experienced supply chain disruption as a result of Covid-19. 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 can 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.

By taking the time to plan ahead and explore the different tools available, firms can ensure they are as prepared as possible for the months ahead.

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

- Fraser Sime, regional director for Bank of Scotland

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