Temporary working capital

Getting back to business after stopping Covid-19

Now that the Covid-19 restrictions are being phased out, businesses should already have started to develop strategies that will allow them to reopen with some degree of certainty.

The design of the means to generate cash flow should be at the heart of any such strategy. Ask any trainee accountant what’s most important; profit or money? They will tell you that if the profit is good, “money is king”. Cash is essential to the survival of businesses.

Companies should prepare rolling cash flow projections for the next four to six weeks at least. This will not be easy. There will be a few iterations and a number of different scenarios, but at least companies can begin to identify funding gaps and understand the scale of any problems. It is much easier to find solutions when you have a better understanding of the key variables.

The focus will be on managing working capital and reducing the cost base. Companies should identify cash outflows that need to be cut, reduced or postponed, and enter into negotiations with relevant third parties.

The earlier these cash flow projections are prepared, the better, although they will need to be reviewed frequently as health and economic conditions change.

Income streams can be more difficult to determine. While it will be difficult to forecast the level of demand, it would be naïve to expect demand to return to pre-Covid levels overnight.

Consumers may well cut back on spending because of the negative impact of recent restrictions on their own financial situation and continue to cut back to protect more vulnerable parents. In such circumstances, any business restart should be carefully phased when possible.


Companies are also expected to innovate around robust marketing methods in the event of a second wave of viruses. Online retailers appear to have benefited from social restrictions. However, it is important to note that online trading is not always the solution for all businesses.

There are a number of boutiques, hairdressers and beauticians who take customer orders using phones and other courier services. Ongoing communication with staff is also vital. Many staff members also review their own budgets and it is important to keep them up to date.

It is also essential to engage with funders. They have indicated their willingness to work with businesses during this global shock. The rescheduling of repayments would be important. For some businesses, it may be necessary to take on additional debt to deal with temporary working capital issues, but this additional debt is not a substitute for cost reduction.

For other businesses, additional debt could have a negative impact on the company’s creditworthiness and should only be considered if it will facilitate additional income streams and create its own capacity for timely repayment.

On the supply side, it is very difficult for donors to choose the winners and survivors of this crisis. Small businesses, by their very size, are more at risk. Start-ups are also at risk because they have fewer resources, less experience, weaker social ties, and fewer ties to customers.

The recent rationalization of the branch network and the abandonment of relationship banking have not helped. Ironically, we never needed a local branch manager who understood the local business and its owners. Therefore, strong business plans are more important than ever.

Plan ahead

The last government also recognized the importance of planning ahead, and a number of government agencies offer a range of financial supports to businesses.

Local company offices provide a business continuity voucher to companies in all industries that employ up to 50 people.

Likewise, Enterprise Ireland is also providing a number of measures, including a Business Financial Planning Grant worth € 5,000, a new Lean Business Continuity Voucher of € 2,500 to help companies gain access to expertise in the review and optimization of operations, and a Covid of 2 million euros. -19 An online retail program will soon be launched to help retailers develop a more competitive online offering.

The Strategic Banking Corporation of Ireland has also launched a Covid-19 working capital program that will provide loans between € 25,000 and € 1.5 million through major banks for working capital needs and / or to fund loans. commercial innovations to mitigate the impact of the coronavirus. .

Northern Ireland businesses can also find advice on the wide range of support available to them at www.nibusinessinfo.co.uk

The key advice is to get good advice, as early as possible, to manage costs carefully, to think about how your business could operate under the restrictions, to think about how technology can help, to continue to communicate with employees and customers and to explore and take full advantage of relevant government supports.

If there is one thing companies have learned from the last crisis, it is that now is not the time to put our heads in the sand. There are supports out there to help and experts to talk to. Working through this crisis is much better than having all of the different scenarios swirling around in your head.

Dr Eimear McGeown is a Lecturer in the Accounting and Finance Department at University College Cork, where she is majoring in Financial Accounting.

Comment here

placeholder="Your Comment">