Uncertainties on cashflows

While continued restrictions have been put in place to protect public health across Scotland, it has had a huge impact on businesses across the country, with many – particularly in the hospitality sector – forced to close their doors.

Even before the latest tiered system was introduced in November, our Business Barometer report revealed a significant dip in confidence among Scottish firms as they faced the challenges brought by the restrictions.

The Covid-19 restrictions are being continually monitored and updated on a weekly basis but it remains unclear whether demand will return in the run-up to the usually busy Christmas period, making it difficult for businesses to plan ahead.

However, there are some steps that Scottish firms – particularly those currently closed – can consider to gain a better understanding of their working capital position and strengthen balance sheets as much as possible.

Forecast cashflow: For many firms, demand for goods and services will have fluctuated during the past few weeks and months and this is likely to continue for some time. As such, agility is going to be key – for example in areas like staffing and stock levels.

Forecasting customer demand is obviously going to be extremely difficult. However, firms should be modelling for different scenarios, which will help to determine whether there is enough cash to cover operations at varying levels of capacity and how their cashflow position may need to change in response.

Tech-enabled payments: For shops across Scotland, it’s worth considering how digital payment methods can be adopted to help them quickly and securely receive payments.

Enabling contactless payments has been the first step for many consumerfacing businesses. Contactless has the bonus of being more Covid-secure too as people aren’t handling shared equipment. Some however will have a higher average transaction value than £45, so alternative solutions are required. Payment methods can include payment by URL, Whatsapp, SMS or QR code, which take the customer to a webpage where they can securely pay via their smartphone.

These methods can also benefit businesses that remain unable to fully reopen, including those in the hospitality sector providing takeaway options, by enabling them to trade even without the customer being physically present.

By taking the time to plan ahead and explore the different tools available, firms can ensure they are as prepared as possible for the months ahead.

Fraser Sime, regional director for Bank of Scotland