Member Article

Forget cash flow - this is a cash hole crisis!

BUSINESSES may be opening again, shops may be seeing customers return and bars and restaurants may finally be welcoming back diners and drinkers.

But in the wake of the Covid-19 pandemic comes a problem of finance for future growth and success.

Insolvency expert Adrian Graham, of leading Sheffield insolvency and recovery practice Graywoods, says that the difficulty facing companies in coming months is more than one of cash flow.

“You hear it being said all the time that the pandemic has created a cash flow problem,” he said.

“The truth is, though, that what many business are facing now is a cash hole problem.

“Cash flow suggests that the money is delayed back down the line but for many businesses that simply isn’t the case at all and there isn’t going to be a sudden release of the financial floodgates that will put everybody back to where they were at the start of 2020.

“The money isn’t simply held up somewhere and companies who have lost sales and orders will not now see those orders coming back in as though nothing had happened.

“It’s perhaps most clearly illustrated in the hospitality sector where even though things do show signs of picking up again, business owners still have to deal with three months of missing sales.

“It’s the same in retail - your shop may have been set for spring when the lockdown started but as the high street returns to some sort of normal, we’re now moving on to autumn and that means two seasons of lost sales.”

Adrian added that government support had given many businesses some much needed breathing space but for those organisations that were facing difficulties prior to lockdown, the cash hole problem could be the one that proves insurmountable.

“Every business has its own unique challenges and long-term survival will depend on many factors including sector, size, the physical limitations of their premises to cope with social distancing, and how they do business with their customers,” he said.

“But for a significant number of companies, the Covid-19 pandemic has been the final straw from which they will never recover.

“As ever, the answer is not to pretend that the problem doesn’t exist and hope that everything will come right by some sort of financial miracle.

“The Government schemes may have provided a lifeline in the short term but now is the time to look seriously at how your business will fare in the future and if the outlook is not good, then there is no better time to seek advice.”

This was posted in Bdaily's Members' News section by John Highfield .