The Coronavirus/Covid-19 pandemic is a global crisis with huge repercussions. The implications for businesses are significant and many in the hospitality and leisure sector have already been placed in a perilous financial position (having had to close their doors unexpectedly this week following government advice that people should avoid bars, restaurants and theatres). The financial effects of the crisis are far reaching and will impact on businesses of all sizes.  

Many months of uncertainty lie ahead and one of the top priorities for management teams over this period will be managing cash flow.


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The importance of maintaining cash flow  

Cash is the single, most important financial consideration for any business, regardless of sector and regardless of size.

All businesses should have a contingency plan in place to react to the current crisis and the likely drop in revenue. Management teams will need to assess whether the business can reasonably maintain a positive cash balance over the coming months to pay staff wages, pay the rent and buy essential supplies.  Managers will also need to consider the risk of unexpected insolvencies within the supply chain, which may have a knock-on effect, and negatively impact cash flow. 

Difficult months lie ahead for all businesses, and it is crucial that owners prepare early for the economic impact of the crisis. Maintaining and monitoring good cash flow is key for the financial health of a business, regardless of sector, and should be the focus in any contingency plan. Management teams should also carry out an immediate review of their existing procedures to identify whether there are any ways to improve cash flow in the short term.

In fact, there are a number of ways that businesses can protect cash flow. These include:

  • Maintaining good credit control procedures to minimise the risk of bad debts arising on existing and future contracts (including requesting deposits or money on account from customers wherever possible);
  • Offering an incentive to debtors for early payment of invoices;
  • Chasing unpaid invoices promptly to maximise the chances of recovery;
  • Establishing a good line of communication with debtors where invoices are not paid within the normal payment period and considering self-help remedies (including payment by instalments and renegotiating terms) where appropriate;
  • Carefully monitoring the financial position of the business’s debtors so that steps can be taken to mitigate the risk of bad debts and identify the recovery option likely to result in the highest return when bad debts do arise;
  • Maintaining accurate and up to date financial records; and
  • Seeking legal advice on recovery options promptly.

The risks to directors of allowing a business to continue to trade during periods of financial distress are obvious and so it is crucial that appropriate steps are taken to prepare for the future and far-reaching effects of the Coronavirus/Covid 19 crisis.


Further information

This commentary provides an overview of credit control procedures and some of the ways businesses can manage cash flow. It should not be taken as legal advice. The Coronavirus/Covid-19 crisis is a complex and quick-moving situation and individual advice should be taken as and when issues arise. 

Druces LLP has an experienced team of solicitors who specialise in debt recovery, restructuring and insolvency work. We understand the practical difficulties businesses may face maintaining cash flow levels in the months ahead, whilst still protecting the wider supply chain and preserving important commercial relationships. We also recognise the importance of finding the best solution for your particular circumstances and achieving the highest recovery rate. We work closely with clients to achieve those objectives.

If you have any queries, or require further information about credit control procedures, or managing cash flow levels generally, please contact our enquiry team at

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