Managing your cash flow and keeping solvent

Managing cash flow due to changes to income streams and keeping solvent is probably the biggest challenge facing local sight loss organisations.

We are working hard to develop the resources and advice available on this page, however in the meantime we have collated some information and resources below:

Cash flow and remaining solvent 

Your priority at this point should be to create a cash flow plan.

To help you do some calculations there is a basic cash flow tool you can download below. Contact us if you need help in making it work.

Reserves – It is for times such as this that reserves exist.  Of course you can “only sell the family silver once” – but it might be time to use your reserves to help with your cash flow issues.  Sometime it takes time to access those reserves and there might be penalties if you need to get at them more quickly – so consider that in any planning you may do.

Furlough grant – Many charities are eligible under this scheme and have furloughed staff. But it maybe the end of May before you receive any payments. Also many charities are topping up the grant so that staff remain on full pay. And we don’t know how long this furlough period will last. Possibly the end of May. Can you manage all of that?

With income potentially changing drastically your organisation needs to watch out for two things in particular:

1. Have we enough cash in the bank to meet the payments we have to make on a regular basis?
2. Have enough money – expected income, cash in the bank, money invested – to meet all the organisations expected expenditure and liabilities moving forward?

You need to keep an eye on the above points to make sure you have enough available cash to make immediate payments and you also need to ensure that you don’t run the risk of becoming insolvent.

Insolvency can arise on two bases:

1. cash flow basis where the organisation cannot pay its debts as they fall due.
2. balance sheet basis where the organisation’s liabilities, including contingent and prospective liabilities, exceed its assets.

If you can’t answer yes to both these points then you are very likely trading insolvently. Whilst that sounds drastic it doesn’t necessarily mean you have gone bust or should close as you maybe able to “trade” your way out of the situation. However you must now look very carefully at your financial forecasts and this is the time to get professional financial advice as you could also be at risk of “wrongful trading” and for trustees the personal implications to trading insolvently are potentially significant.

This is a very brief summary of issues to be aware of.

If any of this is unclear or you are concerned then please do contact us to discuss.

We can often help immediately, but can also help you access specialist advice support.

This information from Russell-Cooke may help provide some clarity.

Coronavirus and your charity by The Charity Finance Group – The CFG have developed a practical guide for charity finance professionals, which is updated with new information and advice as the crisis unfolds. Topics covered include:

• What are we doing behind the scenes?
• What do the current measures mean for us?
• Where can I get guidance and support?
• How can I manage remote working and promote wellbeing?

Basic cash flow tool