The coronavirus pandemic has introduced an enormous amount of uncertainty into economic forecasts and the commercial outlook for businesses. That’s why it is more important than ever to manage capital wisely and communicate proactively with your banks. Sticking to these key principles should help.
1. Focus on what you can control
This is a time to be ruthless about what your business absolutely needs and to take decisive action to get it. That means distinguishing between “must haves” and “nice to haves” in terms of operating expenditure and deferring discretionary capital expenditure until the environment stabilises. Revenue has introduced measures around debt enforcement and interest on late payments to assist businesses that are experiencing trading difficulties which may provide an opportunity to optimise the timing of tax payments to support cash flow. Take advantage!
2. Maximise liquidity
Cash is the only measure of strength in this moment – profits mean nothing. Act accordingly. Review your current cash flow and carry out weekly cash flow projections where possible. To maximise cash in hand, draw down existing revolving credit facilities. Now is the time to analyse debtors to get a clear line of sight on any future payment problems. Check credit insurance policies, too, to be ready to deal with defaults should they arise.
3. Communicate with your bank
You need to make life simple for your banks so that it is easy for them to deal with you. Proactivity and transparency are key here. Be upfront with your bank about anticipated or potential covenant breaches and request a waiver or amendment in good time. It’s not in their interest to put you into default, so they should be motivated to work with you. Likewise, seek the deferral of major capital repayments that may be falling due in the near term. However, pay interest whenever possible.
For more information, or to speak to a member of the Debt Advisory Team, contact Goodbody via [email protected] or +353 1 641 9278
