I was talking to a client last week about his cash flow position, and the impact of lockdown. His answer was enlightening. He said “We are living in a fool’s paradise”.
The period from March to May has been excellent – March year end billing – good collections through April and May and on top of that the Furlough Grants. They (and many others) have not had so much cash in the bank for ages.
And yet…
He was very concerned about the prospects ahead the foreseeable phases which will make life very difficult for many firms – and may prove terminal for some.
The next 3 months look likely to be difficult. Transactional work both property and commercial has not been coming in – this is bound to affect billing and cash flow soon.
The word from the Professional Indemnity Insurance market is that the October renewal will be very difficult for a number of reasons – not least the Financial Stability risk resulting from lockdown. Premiums (and thus cash requirements) are likely to be higher, and some firms may not find cover at all.
And then courtesy of HMRC we will have “the Sting in the Spring”.
In he short-term HMRC eased the effect on firms cashflows by deferring the Q2 VAT payments until March next year. For Partnerships they deferred the July Tax payments until January next year. But these liabilities are only deferred – they still have to be paid.
The cash flow implications of Q1 2021 look awful. So maybe our client was right. Bulging bank balances at the moment do mean we are in his Fools Paradise.
