Skip to main content
5 min read

Cash Flow Planning: What To Do If There’s A Second Wave

The Covid-19 pandemic has already pushed many businesses to the brink. During the lockdown months, as operations ground to a halt, businesses across the UK were forced to take up government support in order to survive.

Now, as most sectors have reopened, we’re seeing some signs of recovery. Restaurants are enjoying a surge in customers thanks to the Eat Out To Help Out scheme. The August heatwave has also helped the tourism trade – with many holidaymakers opting to ‘staycation’ in the UK.

However, as localised outbreaks in Manchester and Leicester have shown, the virus is still very much a threat. Businesses will be worried a second wave and lockdown could be catastrophic for their finances. There’s also the added concern of the UK going into its worst recession on record and what this might mean.


Scenario planning 

Cash flow forecasting is a central priority for businesses during these difficult times. Of course, planning with accuracy is incredibly challenging when so much is uncertain.

That’s where scenario planning comes in.

The old adage of ‘preparing for the worst, hoping for the best’ is a good way to approach this task.

“With our clients, we are doing detailed scenarios using three options,” says accountant Samantha Perkin FMAAT. “These are general guesses. They are all annual growth/retraction and part of budget assumptions.”

Here’s an example of how this plan might look:


Period 1 – Optimistic 2 – Normal 3 – Worse 
Sept-Dec 20 No change -5% -15%
Jan – March 21 No Change -7.5% -20%
April – June 21 5% growth no change -7.50%


1 – Optimistic  
July 21 – June 22  10% growth (not yet pre-pandemic)
July 22 – June 23  5% growth (return to March 20 position) 
2 – Normal  
July 21 – June 22  5% growth (not yet pre-pandemic)
July 22 – June 23  5% growth (not yet pre-pandemic))
3 – Worse   
July 21 – June 22  No change (not yet pre-pandemic)    
July 22 – June 23  5% growth (not yet pre-pandemic)


Keep some money in the bank

In normal times you might not be too concerned about cash reserves, preferring to invest that money back into your business.

Right now, however, your best bet is to have as much cash in the bank as you can. 

“The immediate focus is on building reserves to draw on in the event of another lockdown,” says Matthew Thorpe, managing partner of Haines Watts Hornchurch.

Businesses should build up a ‘war chest’ of funds to safeguard against this scenario. “That means maximising profit margins, tight credit control and well-controlled spending.” 

Here are some of the ways you might do this:

  • Profit margins: Look at your sales volumes and income streams – where are you making your money and is there the potential for growth? Consider your pricing strategy. A small price increase could make a big difference on a high-volume item.
  • Tight credit control: Ensure you have a robust process in place for granting credit and collecting payment. Invoice protection insurance is worth considering.
  • Well-controlled spending: What can you live without? Look for inefficiencies and potential savings across your business. Whatever you do spend, always have an eye on ROI.


Don’t forget about your tax bill

One reason to keep money in the bank is to cover your tax bill. As part of the government’s coronavirus support package, many businesses chose to defer payment on Income Tax and VAT until later in the year. However, some accountants have expressed concern that there will be problems when payments are due in Q1 2021. 

“A lot of businesses have kicked these payments down the line,” says Chris Conway, director and co-founder of Multiply Accountancy. “Most of the businesses that are deferring VAT – they have to live hand-to-mouth. That’s probably a business where profits pay the owner’s wages. So how are they going to accrue surplus cash to pay back the VAT? I don’t think that they’re going to. I think it will be a very interesting time 12 months from now, when people are trying to arrange their time-to-pays, because they can’t pay the VAT.”

If there is a second wave, there is the possibility that the government and HMRC would further defer tax payment. HMRC have also expressed that they will be sympathetic towards struggling businesses and offer alternative payment arrangements. However, this is not something to count on. 


Consider funding options

Many businesses have had no choice but to pursue funding arrangements. More than 100,000 businesses applied for the government-backed Bounce Back Loan Scheme on its first day of opening. 

However, some may have been wary about taking on debt and resisted so far. 

Just to reiterate, BBLS is about as competitive a credit arrangement as you could imagine. 

  • Loan up to £50,000
  • No repayments in the first 12 months
  • 2.5% interest
  • Guaranteed by the government – if you default the tax payer picks up the bill

In fact, even businesses who are not struggling financially have been encouraged to take up the scheme given the favourable repayment terms. But, if you are struggling, it could be lifeline to keep you going in the meantime.  


Adapt or evolve

The scale of the pandemic took most of us by surprise. Few could have foreseen a nationwide lockdown and what this would mean for our businesses.

It was impressive therefore to see businesses quickly adapting to the circumstances and pivoting their operations. Manufacturers making PPE. Restaurants doing deliveries. Gyms running online workshops.

Understandably, many were not able to be so agile. That meant shutting down and having to rely on government support. 

“Ultimately, businesses need a clear business continuity plan of how to operate during a second lockdown, whether it’s about adaptation or evolution,” says Sherad Dewedi, managing partner of Shenward Chartered Accountants and Business Advisors.

Stuart Crook, partner at Wellers Accountants agrees. “Businesses need to ask, ‘what lessons can we learn from what’s happened over the last four to five months to ensure the impact of any potential second wave is minimal?”


Making the most of technology

Technology has played an important role in keeping us all connected during lockdown. We’ve all seen the value of video conferencing tools such as Zoom and Microsoft Teams.

But it doesn’t stop with video calls. Technology can be hugely helpful when it comes to cash flow planning.

“Having access to real-time information through cloud accounting software and associated apps, allows business owners to make informed decisions based on real-time facts,” adds Stuart Crook.

Cash flow forecasting software can help you look at the cash flow implications of activity in your business. Finding the best business bank account will help your company stay ahead of the game by keeping track of spending.

“The best forecasting software will also calculate predicted revenue, expenditure, tax commitments, profit and so on,” says Hannah Dawson, founder of Futrli. “It is absolutely something that every business owner should be able to use to make sure they are making the best decisions for their business. You don’t need to be a finance wiz, an accountant or a bookkeeper.”

Here’s Hannah talking about why your business can benefit from Futrli’s prediction software. 


Informi readers can sign up for free and get the first three months of the paid version ‘Flow’ for free.

1. Go to Futrli
2. Register for free
3. “Upgrade to Pro” and use the code COVID_INFORMI at the checkout.



The hope is that we’re over the worst of the Covid-19 outbreak in the UK and lessons have been learnt from the initial lockdown to control another wave of cases. Despite this, you need to take the possibility of further disruption seriously and plan accordingly. If you need help doing this, many accountants offer cash flow consultancy services and are well positioned to guide you on scenario planning. Find an AAT Licensed Accountant near you.

Share this content

Huw Moxon is the Digital Marketing Manager for Informi. He has written extensively on a wide range of small business topics for Informi since 2016. This blog is a reworked version of an article written by Mark Rowland on AAT Comment

Leave a Reply

Register with Informi today:

  • Join over 30,000 like-minded business professionals.
  • Create your own personalised account with curated reading lists and checklists.
  • Access exclusive resources including business plans, templates, and tax calculators.
  • Receive the latest business advice and insights from Informi.
  • Join in the discussion through the comments section.