As the Coronavirus crisis deepens every business owner needs to examine their cash flow position and take every possible measure to save their business.  Don’t wait for the bale out, not every business will be able to take advantage of it.

If you have an accounts package such as Xero, Quickbooks, Sage or Wave then it’s relatively simple to breakdown expenses by category and do some analysis.  If not then here’s a simple method to calculate it yourself;

  1. Download your recent bank statements as a spreadsheet, this should be possible whichever bank you’re with but is different for each one. so if it’s not something you’ve tried before just search **** bank CSV export. You’ll find help and advice from your bank to help you through the process.
  2. Once you have the download import it into Excel, Numbers or Sheets – whatever spreadsheet software you are used to. It’s important to import not just open it as this will let the software know that the commas in the download break the columns of the spreadsheet.
  3. Now you should have a series of columns, again these will depend on your bank but ours show;
    • Date, Payee, Reference, Type of transaction, Amount and Balance
  4. Now go through the columns categorising each payment as;
    • Non-essential, Negotiable or Fixed
  5. At this point put a * next to each item you’ve marked as Fixed and we’ll assume they are negotiable. Contact each and every supplier or creditor to extend credit or payment terms to see where you can improve your situation.
  6. Anything that’s non-essential try to reduce or cut it completely.
  7. Now go through what’s left – with your new terms and your reduced non-essential spending total the column – That’s your cash burn.

The next step is to imagine how long the Coronavirus crisis could go on for – three months, six months? Nobody really knows the answer to that so work on the longest period you think might be possible, multiplying your average monthly cash-burn by the number of months – then take that off your savings in the bank.

Only once you’ve been through these stages are you able to consider applying for loans either throught the special government schemes or the general lending market.

Coronavirus finance update