Financial Planning | Through the Looking Glass

We are now at a time where financial planning for you and your business is of paramount importance. There is much uncertainty and unpredictability in the future, and as we go ‘through the looking glass’ into a new era – with significantly revised social and business norms, we must do our best to plan for a future in this new environment.

The first question we all asked ourselves was, What do we need to do, right now, to survive financially? This question caused us to react. It caused us to scramble, skirmish and possibly take extreme actions. We did and will continue to do whatever it takes to meet the essential expenses, where we can.

Hopefully most of us have gone through this process now. Most of us are looking to ask the next questions, such as, Are the measures we have taken sufficient? How long can we go on for in the current climate? and, What do we need to do to evolve our business and re-establish income levels?

These are the right types of questions we should be asking. Forward looking questions. A plan to go beyond the short term is now becoming more important. Without a formal plan, you will be unlikely to raise finance. Any bank or lender will need to see your plan and that it is thought through and realistic.

Let’s look at that last question, and how it ties in to this.

How do I re-establish income levels in the future?

  • For some industries this may mean adapting to new business lines, finding ways of working and thinking outside the box. The previous status quo may not be enough to sustain you. A plan to ‘wait it out’ is not a good strategy. The length of the wait is not clear and it could mean months or even years of reduced or even total inactivity. Those that can afford this strategy are fortunate, but most should be looking at alternative business solutions.
  • Have you considered the Business Adaptation Grant? Check it our ‘here‘. The Department for Enterprise are offering support to businesses looking to evolve in the current climate and will meet 50% of any costs. You just need to show how the costs involved in adapting the business are as a result of a changing market – due to the Coronavirus outbreak. The DoE does need a viable business plan to support this.

What are the next steps?

  • A business plan. Regardless of whether you are consider the adaptation grant, your next step should be a business plan. What this looks like should be totally driven by your business needs and circumstances. A complex business adaptation may warrant a detailed plan, looking at all the micro and macro factors. A small business loan for capital investment may not warrant such detail.
  • A cash flow forecast. All good business plans should include a cash flow forecast. You need to establish your working capital requirements, and then in the longer term, how any finance is repaid.

Let’s look at cash flow…

Planning your cash flow can be done in various ways:

  1. Back of an envelope – rough and ready. This can be a useful method, and there is a time and a place for it. Many will do this, probably once or twice, then take it no further. However this does not optimise your chances of success. If you rely only on guess work and rough calculations you are not doing ‘all you can do’. Lenders will not look favourably on this method either.
  2. Excel – the next step up. For those that are familiar with Excel this is a great tool to use. You can freestyle it yourself or download a free template online that will allow you to input your estimated cash inflows and outflows, taking into account your start and end point.
  3. Commercial software – for the tech fans. In the past most individuals or owner managed businesses have probably not used cash-flow or forecasting software extensively locally. But times are now different, and some may benefit from giving these a try. Those that allow ‘what if’ analysis can be particularly useful, allowing you to play with different parameters and plot out different scenarios. Check out some examples below:

Need help finding a solution?

At Harding Lewis we can help you. We have a team of experienced advisors and can assist you with both technical advice, as well as broader and more structured business coaching. Please get in touch for further details.

Disclaimer: Please do not take action based on the contents of this email without seeking advice. Harding Lewis Limited accept no responsibility for any action taken by anyone as a result of reading the above.