Balancing the Books: getting back to business after lockdown

As businesses reopen and adjust to trading post-coronavirus, Barclays brought together a panel of experts, including the Small Business Commissioner, to discuss the challenges that lie ahead for SMEs – and the support that’s still available across the UK. Here are four key messages from the discussion. 

Cash is “king, emperor and president”

Even in normal times, cash is crucial. And these are far from normal times. “For me, managing cash flow is the key thing that small businesses need to do,” said Philip King, the Small Business Commissioner. “Cash flow is not only going to be king moving forward – but is going to be king, emperor and president.”

Claire Bennison, Head of the Association of Chartered Certified Accountants (ACCA), said that despite this fact, her organisation has been “shocked” to find through its weekly tracking that “only one in five businesses report that they’ve relooked at their cash flow”. “You can be viable, but if you don't have the right cash you won't necessarily survive, so this is all about safeguarding your businesses,” she explained.

“The more you understand your cash position, you’re potentially able to make those decisions better about what finance you should be drawing down.”

Knowing their debt position is also crucial. Businesses that have received Bounce Back Loans, for example, need to understand their post-coronavirus position, including “when that debt will need to be repaid by the business”.

However, it’s a fine balance between putting money aside and continuing to invest in the business. “I think it’s good that people are thinking about uncertainty, but what they don't want to do is put too much aside so that they're not able to make the right decisions or the right investment points in order to help their business recover, take advantage of opportunities and come back really strong,” she said.

Communication is key

Ian Workman, Co-Head SME Business Banking at Barclays – who chaired the discussion – said one of the more positive outcomes of the crisis had been the flexibility and collaboration shown between businesses. “I think the country’s in this together and businesses are in this together – that’s so important,” he said.

King urged SMEs to be honest if they’re struggling, as help is available. The pandemic has encouraged “more flexibility, more communication and more willingness to talk to suppliers”, he said, and small business owners should make the most of this openness to negotiation.

“My advice to any small business that’s struggling for cash or is being told that payment terms are going to be extended is to have a conversation with the buyer or the customer as soon as they can,” he added. “And be very honest. If they are genuinely being made vulnerable by the fact that the cash isn’t arriving, then often the last business can do something to help. But if there’s no conversation, no one knows what’s going on.”

The biggest mistake businesses have made during the crisis? “Not having up to date information and looking forward,” said Alastair Barlow, founding partner of flinder, a firm which offers accounting services and management information for growing businesses. “We need to know your current position to look at unwinding that cashflow forecast going forward.”

Recognise your value in the supply chain

Asked what small businesses could do to better future-proof themselves from the risk of another crisis, King was clear: “Recognise their own value.”

“Too often [small businesses] underestimate how important they are for their large customers,” he said. “For large businesses as they come out of this crisis, they're going to need small businesses more than ever. It’s not in a big company’s interest to see their supply chain disintegrate; so it’s in their interest to keep it and make it sustainable.”

Smaller companies have an advantage in being able to be “agile and flexible” and should capitalise on larger businesses having requirements that need to be met quickly. “Big businesses [are] saying that we need small businesses, as this is part of our survival”, adds Bennison.

Don’t be afraid to pivot

The coronavirus crisis has been a prime opportunity for businesses to examine their strategy, Barlow explained. “You get caught up in the day-to-day and it’s very difficult to take a step back and strategically self-assess the business. But I think this is a really good opportunity to throw it up in the air and think to yourself, ‘How can we do this differently?’

“Understand what your strategy is, what your opportunities are. Look at your technology, look at the processes you have in place, who you’re selling to, the makeup of your customers, the geography you’re selling to.” Most importantly, he says, “start with the customer”.

Overall, the panellists were impressed by businesses’ ability to be resilient and adapt. “It’s a horrendous time in the economy and for people in society,” said Barlow. “But it’s been the motivation for business owners to say, ‘My business has fallen away overnight, but I've the infrastructure, this technology in place and I'll do something with that that's so different that I see an opening and a gap in the market’.”

Workman sounded a note of optimism, describing UK businesses as the “backbone of the UK economy. “I've been around long enough to see a few economic downturns – but when you get an economic downturn, it actually creates entrepreneurs. People thinking, ‘I don't want to work for that large corporate anymore’, or ‘I've got a new idea, I'm going to seize an opportunity’ and I think we're starting to see that already.”