Nine ways to control costs and cash flow after lockdown

By Human Capital Group

19th June 2020

Coronavirus has certainly been the big ‘C’ of 2020, but it has also highlighted the importance of two other big ‘Cs’ for businesses across the UK – Costs and Cash flow. As lockdown measures start to cease, housebuilders need to be looking closely at these two factors and finding ways to ensure that their business stays resilient.

Our recent cashflow webinar helps housebuilders to do just that. Andy Beasley, the recently retired ex-regional chairman of Bellway Central, has kindly agreed to speak to Human Capital Group’s managing director Gerard Ball and has shared his wisdom on resilience, costs and cash flow.

Holding the position of regional chairman for around 10 years, Andy certainly knows a thing or two about cost control and cash flow. He previously successfully steered his divisions through a number of huge crises, including the recession of 2008.

The coronavirus pandemic is a once in a lifetime experience for many of us and came completely out of the blue and gave business little time to plan. But now is the time to look to the future. So, what are the nine things that Andy suggests you need to consider in order to control your costs and cash flow after lockdown? Read on to find out more…

1. Cash is king.

Anyone who has worked through previous crises know that cash is king. Cashflow forecasting is the single most important activity a company has to deal with at any one time, even more so in current circumstances. Knowing what your cash balance is every week and month is crucial to make sure you stay on top of it.

Andy suggests that the senior management team of every SME Housebuilder should lead a review of the cashflow forecast covering the next 6-12 months. This will have to include many assumptions and Plan B (and C) scenarios.

2. Contact Banks and loan facilitators.

Make sure you are speaking to your banks regularly, make sure that you have a good rapport and ensure that all of their ‘boxes’ are ticked, and that confidence is instilled.

3. Coronavirus business interruption loan scheme

There is help out there for those who look for it. For example, there are interim loans up to the value of £5million available from the Government. Housebuilders ought to be looking at options like these and should realise that help can be secured in a myriad of ways.

4. Contractor relationships

Review all your contractor relationships and make sure that you are looking after them and that payments are going through. Otherwise, you may find yourself in a situation where a contractor leaves your site to work somewhere that they know they will get paid. It is understandable that everyone is nervous at the moment so try not to exacerbate this feeling.

5. Consider new avenues

Difficult times require difficult decisions so maybe now is the time to consider options that you never have before:

• Could you sell your show home to a landlord investor and then rent it back?
• Can you set up a COVID-19 exit clause for buyers so they can pull out quickly if their circumstances change?
• Can you extend the presentation of the site and try to move building work further into the development? This will give the illusion at least that you are working towards the completion of the houses.
• Can you sell any smaller private units to landlord investors – it may reduce your margins, but it is better to have money in the bank than sitting with Work in Progress in the field.
• Can you drop the price of larger units?
• Can you reduce head count anywhere or can your subcontractors be more flexible in the work they are doing?
• Can you re-plan your development in order to build smaller units that may sell faster?

6. Costs and Expenditure

Try and get cash back anywhere you can i.e. try and defer land payments, don’t buy new sites until things have settled down, renegotiate on prices if you can, postpone any fees.

Now is the time to concentrate on surviving rather than thriving and this will allow you to sit tight and see what the future holds.

7. Can you uncover new opportunities?

If you are cash rich, then they may be lots of opportunities to take advantage of in the coming months. Make sure you keep your ear to the ground to see what you can uncover.

8. Communication tactics

Communication is essential at all times, but not least when life feels uncertain.

• Make sure you are communicating with site and contracts managers, so they understand your new business plan and how you want your sites to progress. They need to know that every pound you spend has to deliver a return.
• Check, check and re-check your reservations; Communicate more with your estate agents and solicitors to make sure things aren’t changing.

9. Charm your buyers back

Don’t treat your customers like they are stupid and don’t underestimate the psychological importance of seeing work continuing as normal on a site. Abandoned sites often feel sad and don’t instil confidence in buyers who want to know that their homes will be ready sooner rather than later.

So, there you have it, the top nine factors housebuilders need to be considering. Andy also recommended that every business should be keeping up to date with the latest advice from organisations like the Housebuilders Federation and Federation of Master Housebuilders, as well as staying abreast of new initiatives from governments.

For more information from Andy, make sure you listen to our latest podcast episode – Andy Beasley, Cash Flow Management.