Catherine Livingstone

That’s because many operators have accrued significant debts over the last 18 months as they have struggled to keep their operations afloat, and the culmination of the furlough scheme is set to heap further financial pressure on their ability to service these debts.

Catherine Livingstone, partner and head of the business advisory services team at Wylie & Bisset, said: “Many businesses took advantage of bounce back loans and VAT deferment as, in the early stages, they were unsure what impact Covid would have on their operations and they were right to be cautious. But now the time is rapidly approaching when they need to pay back these debts.

Ms Livingstone suggests that a key issue that all SMEs should consider sooner rather than later is to review cashflow projections, be prudent and identify any issues arising so they have time to approach the bank to arrange an overdraft or determine if they have any scope to delay outgoing payments or bring debtors in quicker.

She said: “If they prepare cash flow projections on a worst-case scenario and are able to determine that they can survive, then they will be well prepared and be in a sound financial position when the economic situation transpires not to be as bad as feared,” she said.

“SMEs need to be realistic and, where possible, seek to renegotiate the best they can with suppliers and customers; renegotiate debtors terms to get the money due to them in as quickly as possible and delay payments if they can.”

Ms Livingstone stresses that while cashflows might seem perfectly adequate at the present time, that may be because SMEs have deferred their VAT bills and have money in the bank because they have taken out bounce back loans.

She added: “Now is the perfect time to prepare cash flow forecasts. I would urge SME owner/managers to review the longer-term financial health of their operations as a matter of urgency.”