Even without the Covid-19 pandemic, business should watch their debt levels to ensure they do not spiral out of control. This is now of even greater importance because of the extra pressure that lockdowns have imposed on businesses, including veterinary practices.
Practice debt is not, in itself, a problem. But, for the long-term viability of any business, practices should keep debt levels down where possible and increase cash-flow. When you work long hours focused on caring for animals, the long-term finances of your business are not always your priority, but it is important to keep the situation under control to safeguard the practice and to ensure you meet your own legal obligations so you don’t leave yourself exposed to personal risk.
There are several simple steps you can take to avoid that and keep on top of your debt and finances:
- Check your balance sheet and cash-flow forecast often enough that you know them well. You can then anticipate problems and act before they have an impact.
- Talk to your suppliers; will they agree to longer credit periods or instalment arrangements to take the pressure off cash-flow?
- Ask your bank for payment plans if you have any bank debt – banks will be at their most flexible now, wanting to support businesses which may have struggled as a result of the pandemic.
- The same applies to HMRC. If you have outstanding VAT and PAYE liabilities, consider whether a ‘time to pay’ arrangement would be useful.
- Keeping your key financial stakeholders informed and involved will maintain a positive relationship and reassure them that any difficulties are only short term.
- Be proactive and consider re-financing options to consolidate your debt which may make it easier to manage.
- Keep your suppliers’ position under review – they will be feeling financial pressure too, and you want to maintain relationships where possible.
- Your practice can also be affected by bad debts – when pets need emergency treatment, it may be hard to consider your cash-flow but do think about how much credit you give customers. Are debts chased regularly? Do you need formal debt recovery assistance to recover unpaid debts? Anything you can do to bring cash into the business more quickly will reduce pressure on your overall cash-flow position.
If, ultimately, you feel that your debt levels are no longer manageable, you should seek specialist advice on the options available to you. It is vital to seek early advice in this respect as the options open to you will reduce as the position worsens.