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Businesses urged to monitor cash flow as Covid restrictions ease

June 7th 2021

Businesses are being urged to monitor their cash flow as corporate insolvencies look set to rise despite the easing of lockdown restrictions.

Carly Davies Debt Recovery Manager provides an update.

The insolvency and restructuring trade body R3 says that government support such as the furlough scheme have masked the difficulties some companies are facing.

There were 2,384 seasonally adjusted corporate insolvencies in the first quarter of this year, a reduction of 21.9% compared to Q4 2020 and a fall of 38.3% compared to quarter 1 2020.

However, the figures don’t tell the underlying story.R3 president Colin Haig said: “It’s clear Government’s support measures are still helping to keep businesses going, but they have pushed back rather than prevented the financial pain of the pandemic from translating into a sharp, sustained increase in corporate insolvencies.

“The total number of corporate insolvencies between April 2020 and March 2021 fell by more than a third compared with the same period a year earlier, while GDP fell nearly eight per cent during the same period. A drop in corporate insolvencies of this scale during an economic climate like this suggests that corporate insolvencies are likely to rise – and rise sharply – in future.

“As the Covid restrictions lift and we begin to return to normality, businesses face three key challenges. First, they need to keep a careful eye on their cashflow levels to ensure they don’t fall into the trap of over-trading.

“They also need to make sure they have a plan for reopening in a way that’s sustainable, so they don’t undo their efforts to survive the last year by mismanaging the next couple of months.  

“And they need to think about how they will manage when the Government support measures end.

“We urge anyone who is worried about their business’s finances to seek advice from a qualified source as soon as they become concerned. Doing so will give them more options to turn their financial situation around, and more time to take a considered decision about the best approach for their business.”

If you would like advice about debt collection, credit control and insolvency issues please contact Carly on 01228 516666 or click here to send her an email.

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