by Rob Adamson of Armstrong Watson

AS Coronavirus (“Covid-19”) continues to make a significant impact across the globe the supply chain is likely to be affected, but what can you do to minimise this impact?

Whether you sell clothes or build cars, at least part of the supply chain will probably have originated in China. So with China ‘shutting down’, the impact will be felt worldwide with supply chain difficulties likely to filter through during March.

There may be an immediate cash impact if you need to purchase goods from elsewhere, especially if you don’t have favourable credit terms with alternative suppliers. A potential increase in the cost of goods may also impact on your cash flow and turnover may be affected if you are unable to source alternative supplies. In the meantime, you will still have to meet your existing overheads, resulting in a squeeze on cash.

How do I limit the disruption to my business?

Reviewing your supply chain to understand where your components come from will help you to identify where issues are likely to arise and whether an alternative supplier can be used.

Carrying out stock checks will also help you to identify and understand your purchasing requirements for the immediate future, and assist you in your supply chain review, giving you an opportunity to highlight unwanted stock you may be able to offload.

You might also need additional cash for a period and/or your ability to collect in your debtors may be impacted if your customers are affected too. Preparing a short term cash flow forecast will help you plot the peaks and troughs – and any holes - from a cash perspective.

Once you’ve identified the pinch points, an exercise in “smoothing” can be carried out, looking at larger monthly payments and whether they can be broken down. If you still need additional cash, then you should first contact your existing funder - their rate of borrowing is likely to be more favourable (and quicker) than alternative lenders.

Considering how your business will be affected by the Covid-19 outbreak and avoiding knee-jerk decision making is key. Reviewing the implications early will help you to weather the potential storm but if this exercise identifies additional funding requirements for your business, then please get in touch with us. Contact Rob Adamson on 0113 2211 300 or email