 This is the Investor-Ready's programme webinar on building financial resilience and managing cash and liquidity, just in case you wondered why you'd got up at this hour of the morning. We have a panel of Hugh Thomas from Puffin Foods and sits on the food board, Chris Terry from Peters Foods, Finance Director, Rodry Evans, Regional Manager for Development Bank Wales and Alan Lewis, Finance Director and Lead on Investor-Ready. I will hand over to Hugh in a moment just to introduce what the food board does because it's sponsored this programme and then we'll get into the nitty-gritty of the subject of cash. Hugh, could you just explain one more thing? Thank you, John. Just to introduce myself again, I'm the Managing Director of Puffin Produce based down in Hampton West in West Wales. We primarily do potatoes and vegetables into the major retailers in their Welsh stores, so that's my kind of day job. As John said, I'm also on the Welsh Food and Drink Industry Board and we started that group probably four or five years ago now. And one of the work streams that came out of that group is we felt that food businesses in Wales needed a bit of help to upskill their kind of financial controls and have the ability to go and source help to improve their systems essentially. So hence the partnership with BIC through the Welsh Government, the Investor-Ready programme and this series of seminars has come out of that work stream. So one of the things I would say always is if you've got any questions, always come back to the BIC team, but I think today we're concentrating on cash and whatever. So I think I'll hand back to John, which should be a good little good session. Brilliant. Thank you, Hugh. Yes, I think building financial resilience and managing cash and liquidity sounds very dry. But in reality, and I think as we've all discovered this year, not having enough cash at the right moment is pretty awkward. Now, having been a small food and drink producer myself and having worked in the sector all my life, I use now the guiding principle that a rather cynical and hard-bitten Lancashire cheese maker taught me a very long time ago when he said there's no such thing as a new customer lad, just somebody else's bad debtor. But of course, it shouldn't be that grim, actually, Rodney smiling there. But of course, it does beg the question, do we know who our customers are, their track record and their ability to pay? But also, aren't we also a bit embarrassed to ask about money? You know, it's a bit vulgar, asking for money, discussing the price, chasing those invoices that are owed to us. So perhaps through this session, one question we can all ask ourselves is, when we turn the computer on in the morning, do we know immediately what the balance is in our bank accounts? Do we know which invoices are falling due this week? Do we know who owes us money? Have we got a forecast of where we'll be at the end of the day cash wise? And of course, where we are in our own business cycle? And of course, if we chase money, you need to make sure that we're entitled to it. Have we got systems and procedures in place for purchase orders for terms and conditions? And most importantly, do we know where we are in our business cycle? A lot of food and drink businesses rely on Christmas or a seasonal uplift. And of course, one of the things that's going to be very difficult this year is to know, are we going to end up in a better position at the end of our business cycle than where we were at the start? Given all the noise and confusion in this market. So if I may start with you, Chris, can I just ask a question? I'm going to ask this of everybody. What is cash? What do we mean by cash? Yes, it's an interesting question. I think cash is any liquid funds you have access to. So we have an ID facility that we use because it frees up our debt straight away in terms of cash availability. So in that respect, anything we invoice is immediately cash for us. It's different in other businesses where you just mentioned you've got to wait for the debtor to pay. But cash does vary. So it is anything that is readily available to spend, I would say. And from your point of view, just for those people, when you said ID, I mean, we're talking about effectively being able to get the money from the invoices that we generate today, rather than waiting 30, 60, 90 days depending on who we're selling them to. From your point of view, from a management information point of view, how do you know where you are cash positioned today? Well, we do a daily cash forecast. So we have a 14-day look ahead on a day-by-day basis. Because we have some very large direct debits that we need to be aware of when they're hitting us. So you're managing a low average bank balance and you've got 100,000 coming out of the direct debit once a month. You need to know when that's happening. So we do a 14-day rolling every day, which gives us visibility of what's going to hit us in the next two weeks. We then do a weekly, a 13-week visibility so we know what's on the horizon. And we monthly, we do a 12-month view. So we've got three perspectives. Obviously, each one of those is, the daily is very accurate, the weekly is less accurate and the yearly is not that accurate to be fair. But yeah, so it's all about the visibility of what's around the corner, I think. And has that forecast notwithstanding the noise and the difficulties we've had at the start of the year, as you're starting to come back, are you finding that planning horizon, that visibility, as you call it? Yeah. Is that, I mean, that's accurate for you or a good predictor, but also something that you have to use with the people who support the business as well? Yeah, we find certainly the 13-week one is very accurate. Obviously, the 14-day one is very accurate because we know what's coming immediately right to us. And we can see, you know, we've seen our food service business take a real dive and we can see that coming back. And you can see that in the cash flow. When you feed the sales expectations through and you drive that into cash, you can see that cash being generated in the forecast, because the bank balance will go from a very little negative number to a positive number. So you can, it's good to see that visibility and it's reality as well. Yeah, something we'll come back to later on is the term over trading. And I suspect it's something that might be a hot topic this autumn as certain sectors come back. Hugh, you've got to pay level business in terms of? Not really, John. Obviously potatoes are going to harvest it in the autumn and then go throughout the year until next year's harvest comes along. So you get storage costs, et cetera, on top of those potatoes, kind of evaporation losses, these type of things. So we work in a kind of yearly cycle where we are much more profitable when the potatoes are coming off the field and we're almost kind of the end of the season. And then before we start harvesting again, we're making very little if any money at all. So, you know, but we are lucky is we can very accurately predict that raw material cost. Because most of our businesses supply in the major retailers, and we've got kind of set fixed contracts with them, we can very accurately predict what is coming back in as well. So, you know, as Chris just said, we do a kind of weekly, a four weekly and a year projection, but we are very lucky that we can very accurately forecast our year projection probably within three, four, five percent really. Our business is pretty locked down, you know, and that gives us quite a lot of power in this business to know exactly what cash is coming into business, what our balance is going to look like in 10 months time when we're looking at CapEx projects and these type of things. That's interesting because of course, many food and drink businesses do have very seasonal uplifts and of course, you know, this year particularly we don't know quite what the availability to the market is going to be. No, I think the kind of the Christmas and the new year, you know, even the retailers have got no idea at the moment, John as well, you know, we're doing various scenarios with them, you know, if there's a second lockdown or whatever you know what is January, February and March can look like is the hardest thing to forecast at the moment. Yeah. Okay. Roger, obviously, you have people in the past I've been one of them who trail up to you and say, well, we thought we were going to have quite a good season but we haven't generated the cash we thought we had, and we're going to need more cash to get between here and Christmas. What sort of information do you want to see from people and what discipline do you expect to see from them when it comes to cash management. Yeah, okay. Thanks, John. Well, I think it's very much in line with what here when Chris have already mentioned this morning that the key bit for us is always going to be the cash flow and the cash flow forecast and the accuracy of the information being provided. So whatever business and whatever size of business we're working with, we're always looking for them to be either creating or using a cash flow forecast regularly and, you know, the important thing is that that's a working document and that it's updated as regularly as possible with actuals against forecasts that there's a sensible level of sensitivity built into that information to cover any unexpected blips or delays in payments. We're also looking for a safe level of headroom if you like. We don't like to see things running too. So, you know, that sensitivity in that headroom goes together. We'd like to make sure that there's enough of a safety net if you like so that the businesses know they're going to be safe and more importantly can get on with running the business and not have to worry about cash on a daily basis. Yeah. And just just while I think of it, can we just do all the people are attending we've got the chat facility. So if you want to bang a question across to us use the chat facility and we'll pick it up and and and feeding as we go along. Roger, just coming back to that headroom and forecast and people think they need to do a complicated spreadsheets with all sorts of sensitivities. That's not necessarily the cases in. No, not at all. I think, you know, the important thing for any lender is to understand the assumptions behind the cash flow forecast. And as again, some of the other panelists have alluded to the further you look forward, obviously the harder is to be accurate. So, you know, as Chris mentioned, the two week forecast you'd expect to be pretty accurate and then three months, you know, you'd expect a bit more leeway. But again, you'd expect that to be pretty close to the mark. So, you know, depending on how the models work and what sort of system you use, you can then sort of run various sensitivities within the model yourself and push out payments and that sort of stuff. You know, the most important thing is that you've got visibility about what you're going to need when you're going to need it, you know, from my perspective, there's probably never been as many options out there for businesses in terms of accessing liquidity and short term cash. But that's only true if you give yourself plenty of time. So I think, you know, the longer or the better and more accurate the information, the quicker, you know, you've got an issue coming up. The more time you give yourself then the more options you've got out there in terms of going to get. And I think that's the key thing for businesses in trying to make sure that they're managing their cash and excuse me liquidity is to, you know, try and see your problems coming as far down the road as possible. So in a way it's not about how beautiful is my forecast it's more about how what could possibly go wrong and here are the risks I've laid them out with some some degree of how I'm going to cope or mitigate for those risks. Absolutely, you know, again, from a lender's perspective, if you're looking at a forecast where everything needs to go absolutely to plan and it's still really tight then you know what happens what's your plan be what's your plan see because as we all know in business things don't always go to plan and you know things get delayed or take longer than expected or cost more. So, whenever we're looking at it either we're expecting to see some sensitivities built into a forecast or if they're not then we'll run them ourselves and sort of look at different scenarios so. If, from a business perspective, if you want credibility and to try and get, you know, as successful and as quick a fundraise as possible, then making sure that the lender or lenders understood the assumptions behind your model is a key, key thing to consider. Alan, you advised lots of different companies and you see their forecast then you have to knock them into shape what was the sort of guiding principle for doing a cash forecast and the sort of factors that they should be taking into consideration. Well, what we tend to do and we do work a lot with banks and the development Bank of Wales in particular. So, Roger has outlined what they're looking for. And we try our best to work with companies so if there's anybody out there listening that would like some assistance in producing the sort of thing that probably mentioned then you only need to contact us and we'll provide you with some assistance. Well, what we tend to do and we can do this to whatever level of simplicity or whatever level of complexity that the company wants, we will model their company. Nothing fancy just in Excel, but we will look out for those drivers in that company, you know the simple ones like your sales. And model that so that we produce the full set of accounting information that the likes of every once being the profit and loss the balance sheet and in particular the cash flow. But then it is easy to flex that again, as Roger has said that they like to see play the what ifs with the information if you like, what if you lose one of your, you know heaven forbid but if you lose one of your major clients what happens. If the price of your raw materials goes up 10% what happens. It's that playing around with the figures to see what happens if the unexpected happens. And as I said, we can assist companies do that. And that's a good point is the, and we've had the question from Andrew as well about forecasting I mean this year we're forecasting Christmas and I know personal experience Christmas always seems to come as a rude surprise to the food and drink industry, mainly because it's not the same every year, but also we've got potential for a second wave of COVID and also potentially hard Brexit and the impact that had when we first had that news on currency and some of the inputs and availability of packaging what have you. How do you risk manage all of those other factors and still give your banks and or invoice finance people the confidence that you can manage through those risks just just generally. I think I think it's as Roger is saying it's about modeling the sensitivities in there so you've got a model, you can build in sensitivities on price on payment terms on things you don't know about so yeah you know you're going to have restrictions on imports etc. And is that going to cause a delay in getting products therefore delay to sales you can you can model all that in the building sensitivities around the model. Christmas for your example Christmas quite unusual for us because we know it's the worst time of year for us around the best time of year. It's people move out of the core products and buy the more expensive Christmas products for two weeks, and they settle back into the pastries and those sort of things but. So we have a real cash outflow at Christmas because we've got an overhead base to cover with the lower sales activities so we know that comes and we could we can model that as a risk to the business. So we've got full visibility of that we know it's coming and we know it's going to happen we can put sensitive is it sensitive is around it. As you just discussed, but it's about I think it is about having that visibility still and being able to model it. And the currency angle I mean, do you resort or would you advocate resorting to things like hedging where there's the perspective of Brexit and had on currency in the past can you can we can we hedge for that. We could cover any of the foreign commitments, I would recommend that I mean as a business we we not affected by currency significantly we have a very small amount of imports. And we are indirectly affected is quite interesting because a lot of our supplies will come by UK suppliers and they will be directly affected we're indirectly affected. We don't we don't know what will happen there. We obviously resist any inflation that they pass on to us due to currency, but they will presumably have to take some of the some of the pain if there is any movement in the currency. Yes, I was going to say, if you're a smaller business I recall when when we in 2016 we had Brexit announced my whole sailor at the time told me my plastic bottles were going up 30%. Literally, you know that was it, you know, the cost base went up huge you use an awful lot of packaging I don't know where it source from but is that is that that specter of Christmas Brexit and the potential of currency and or sort of seismic movements and what consumers might do. How do you manage that risk. Yeah packaging is is not a great proportion of our spend john you know we use these very thin 25 micron bags you know it's not not a large portion I think but if you come back to Andrew's question you planning for Brexit to the US was the answer to that is yes as well you know because you know the retailers have been doing this the last six 12 months so you know for example this is we're growing a lot more cauliflower for Christmas and New Year this year because the retailers are perhaps expecting disruption in the ports where they would have brought a lot of Spanish cauliflower in that time of historically so you know the retailers already reacted to this you know we've then got to manage that and whatever but Christmas is always a really busy time for us anyway. You know when we are predicting already you know our very very strong Christmas if people are not eating out through the food service sector for their work Christmas dinners and these type of things you know all of that all of that work is going to throw flow through the retailers which ends up coming through this business so we've done a lot of work on this with the retailers already we're mapping lots of scenarios we're also mapping disruption due to Brexit you know and doing what we can to mitigate the risk for our customers as well as ourselves. So when we say we're mapping for these things are we sort of euphemism for saying we are going to need more cash because we are going to have to buy forward or we are going to have to lay down stock in the business. That effectively gets us back to subject to potentially over trading in that our cash requirement for our normal business has been increased or has exceeded what we normally need. Yeah and that comes back to payment terms isn't it John you know it's what you don't want is a really big order from a really slow payer you know so it's you know we have to manage all of that you know we you know we can move our terms with the retailers if they're asking us to do a lot more you know this is one of the things that we talked to them about I'm sure you're going to come on to this later in the seminar John but you know it's something that we're very happy to talk about if they want us to do another thousand tonne of business we will one of the we'll talk about price and then we will talk about payment terms. Yeah and I think to be fair to the retailers they have improved have they not in terms of generally accepting that they can't hang on to this stuff for 30 60 90 days anymore. Yeah they spot on that you know they're on the day you know that we've never we never get you know this is some kind of delivery note discrepancy or something that just gets put to one side you know the rest of the money just comes on on the day is going to come. Just to pursue this remember because I was talking to a business yesterday that was growing stuff that's not going to come to market for 36 months and of course they're trying to put a price mechanism in with their downstream customers. Because of course they want to buy a head and hedge on the inputs and they need to sell ahead to hedge on the price to know that they can cover the cost of those inputs. When we talked about mapping and planning and planning horizons how far ahead realistically can you have a conversation with a customer about what we're going to pay for and when we're going to pay for it. The conversations of retailers now they are pushing contracts out longer and longer you know I think you know I don't name names but you know you could almost go to kind of five year deals with some retailers now because they see that as a mechanism of looking efficiency because you can spend on capex for automation or whatever and you know they're inflation free for four or five years so you know that there is benefits on both sides of that so. And then the payment terms is a separate thing you know whether you're 30 60 or 90 days you know something that you've got to discuss with a retailer and they've got quite a bit of flexibility in that now. You've seen some of the published headlines that they're moving to shorter terms for some of the smaller suppliers and these type of things you know and that is available so you know I would recommend to your person John is is your talk to your customer you know it's do that nice and early and you know see what they've got to say. But that so Roger I mean this is this is the going to characterize our autumn isn't it is people having to what we call hedging which is effectively just trying to plan forward and nail down prices and contracts so that we've got more known knowns how how easy is it to finance stock term you know stock loans and the like so that people can can carry that stuff particularly if they want to send it off site in advance of either Brexit as in you know there might be a lot of tin cans of rice running on the other side of the channel waiting to be called off or just put in cold store ready for Christmas and and you've you've sort of booked your spot and you've booked your price. Yeah, you know I guess John enough again from a funder's perspective. Nobody's expecting that businesses going to cover absolutely every risk that's facing them you know that's not realistic we're not expecting every base to be covered because it just can't be done there's inherent risks in running businesses as we all know. I think you know what we would expect to see is that the risks have been identified and steps taken to try and mitigate those where possible. And where that's not possible either at all or impact, then look at what the implications are for the business and what steps can be taken then to to address those risks and, you know, what the implications would be for the business. So the over trading, which I imagine is one of those things that may well, we might well start talking about this sort of is that something that you that you're mindful of and I'd give advice to clients on. Yeah, we're always mindful of that especially you know for any growing business there's always going to be that risk of over trading comes back to the cash again and the liquidity. And it's all tied together and you know we keep coming back to this cashflow forecast if you're going to be taking on new business, potentially different payment structures different payment terms. Then you've got to model that into your cashflow to see what the impact would be. You know, especially for smaller businesses or businesses starting out. I think there's a lack of understanding sometimes that sometimes, you know, more businesses more dangerous for your business than a lack of business if you can't fund it then you're going to run out of cash. That's the major cause of failures for business is not a lack of profitability sometimes it's a lack of managing cash. Well, I think it's a hue alluded to that and you're starting to sound like my my Lancashire cheese maker in that salesman come wandering into the business or look I've got this lovely great big new order limey that will finish us off now because of the share requirements of cash and disruption. And of course there's some due diligence to be done on this stuff as well but just just coming back to that, you know, if you are growing and you're trying or you're trying to scale up again because you've quite gotten down in the first half of this year. How should companies, apart from bringing a cashflow forecast for to you, what's the sort of hierarchy of cash sources that they should be thinking about in terms of funding that additional stop to do that extra business. Roger. Well, there's a lot of different options, John. As I said earlier, I don't think there's ever been a time when there's so many options available for businesses. So, you know, anything from traditional bank finance, trade loans, overdrafts, alternative funders, there's invoice finance which Chris has mentioned and there's been a lot of innovation in that market over the last few years. I know, I think John, you and I've spoken about it before and there's some reluctance to enter into invoice discounting facilities for some businesses they feel that it's going to lock them into. It's addictive, isn't it? Sorry. It can be addictive. Yeah, absolutely. Absolutely. And I think, you know, if you look at some of the traditional product offerings, potentially you are locked in for a period of time. I think there's some benefits to it and it's the type of facility that can grow with your business. So, when we're talking about over trading, that is potentially quite a simple and neat way of getting over that as long as obviously you're talking to your funder and, you know, they can increase the credit limits and the credit line. But, you know, there's different products out in the market now that things like selective invoice finance so that if you don't want to use a finance facility on a permanent basis, you can select which invoices you want to sell. That gives you flexibility and availability of short term cash. So, there's all sorts of options out there for businesses. From the bank point of view, there's no shame in turning up to talk to you about a trade loan or an overdraft facility whilst at the same time looking at those other sources of finance? From a development bank perspective, we don't provide overdrafts or trade loans. That's not the sort of thing we do with more of an investment bank. But I think from a, you know, I come from a high street banking background, certainly you'd be expecting businesses to be looking at a range of options. What you don't want is to be faced with a call say on a Friday afternoon to say, you know, I've got a massive direct debit going out on Monday, I need a huge overdraft increase. You want people to have been prepared, looking at their cash and managing that so that you've got time to look at it, you know, from a funder's perspective. And as I said earlier, I think it's the better your information and the more accurate it is, the quicker and the earlier you know what your cash requirement is going to be. And the earlier you know, then the more options you've got, if you can see it coming to a three months down the line, then there's loads of options out in the marketplace for most businesses. Yeah, I think Chris, you were talking about, I mean, I can hear people on the other side going, well, we're not all as good as Chris is doing the 13 week planning horizon. But of course, you know, planning can be walking around thinking in your head what is going to fall due. But of course, it depends who you're selling to and not all customers are equal in this as we've sort of alluded to. How do you prioritize where you're going to get cash from and how you're going to fund business, particularly as you've already mentioned, the hospitality sector has got to come back. That's got to be funded and recharge that supply chain. And I'm guessing from our previous webinars, trade credit and trade credit cover isn't so easy. How do you manage around that? Yeah, I think, as you mentioned, the invoice discounting facility that we use is can be addictive. It's very useful when you're growing. It's very useful when you need cash on an immediate basis. But in terms of, you know, our customer base, we have, you know, probably 60% is major retailers and the other 40% is can be very high-risk customers, particularly in the food service sector that we deal with. And given what's happened in the last three months, you know, we've had quite a few, well, not quite a few, but two that have suffered in that respect. So we've got credit insurance where we can get it against all our customers, which, you know, again, it's a cost, but it takes some of that risk away. So we use credit insurance to cover some of the risk that we have with the high-risk customers. But again, it's managing those customers. You can't rely on insurance. It's the last resort. So it's communication with them. It's, you know, having that relationship with the customer. So you understand, you know, we can go through all our customers and we know who are the bad ones, who are the good ones. We know who we've got to chase for a payment on a Friday and then we know they work paid on Monday and Tuesday and the next week they work paid on Wednesday and eventually move the payment terms back a week and a week and a week. So I think it's key to understanding the customers you're dealing with and, you know, and mechanisms you have to force them to pay, you know, to see you don't run out of cash, whether that's, you know, stopping a delivery and those sort of actions. And, you know, no one likes to be without the product, but they've got to pay for it. So it's a fine balance. You don't want to lose a customer for the sake of one delivery. So it's maintaining the relate it's having a relationship with a customer that's key. I think in terms of managing that cash flow. That relationship obviously it's the formal relationship in terms of doing your due diligence on who your customer is and like I guess as well as well as your ID facilities being comfortable with them and the like where you don't know the customer what do you have a do you have a procedure for sort of how you bring on board a new customer and how you get them trained to your to your credit terms. Yeah, so we'll we'll do pro former initially. So first couple of orders will get a performer payment with a very very small and high risk. Clearly if they're one of large retailers we wouldn't we don't do that you can do that. But where they're independent traders small shops will have a pro former basis with them. And when they've got a record of maybe three deliveries, we'll review their credit rating. For example, credit so credit safe any of the credit agencies. I'll review their accounts if they've got any accounts visible but a lot of the small ones are micro entities so there's nothing to look at. And it's really just initial terms being low risk in terms of, you know, 30 days 10,000 pounds in our case now that sort of relationship. And if it grows, then you evaluate it again but it's it's small steps I think in terms of building that risk profile. So how much the same for yourself or do you not see that turnover in. We are very much a retailer facing business we're 95%, but we do have blocks of access for material that we have to trade away so then, you know, the kind of potato industries throughout Europe is, you know, is littered with bad news stories in that in that way. So, you know, but we know our sector, you know, so we will deal with trusted partners and, you know, if there's somebody new, it's a very similar, similar process to Chris you know it's starting off slowly. You know I think what we do here as well is, is, is we're really rigorous on our credit limits, you know, for even the kind of the more trusted partners, you know so there's, if people are hitting those credit limits you know we're speaking to them really and go and look you know I know you've ordered this for next week but you're going to have to send us a check for this if you can remain so we're just keeping an open you know the finance team you're keeping a really open dialogue with those guys of, you know, keeping them within their credit limit and don't, you know, don't let that kind of credit limit drift over time because you're not looking at it. Yeah I think I wasn't joking when I said about getting customers trained I mean in my previous life in particularly in dairy. I mean I remember asking two tankers to pull over to the side of the road and wait until we got clearance for money had gone in the account before they rocked rocked up it was, it was, you know, it's particularly difficult to run a business if you haven't got the raw material and that turns the focus for people to pay. As you say that's not great for the relationship and it's, you know, are you better off using do you think anybody here really third party credit companies to go and chase your invoices I mean within voice finance that's sort of for you to some extent Chris. So we, we don't contract that out so we chase all our own so we don't subtract the actual collection. So we just take we just use the cash available from the Royal and collecting it. We, we were certainly the side of that where we get chased by third parties that have contracted out. I, you know, I, it's not the best way I don't think it's very impersonal it breaks that relationship with your customer or supplier. In terms of passing all that work to someone else. And they, they're very they can be very mechanistic in terms of how they operate as well. So there's no, there's no leeway, no understanding of the customer that or supply that you're dealing with using that. So it's a way of managing the cash collection but it's very personal, I think. I mean, as you say risks damaging that relationship. I mean, equally as you say, you know, people chase you. I think that in any business is always somebody chasing chasing for something. Particularly in a crisis. I'm, I've always said to people the worst thing you can do is stop talking to people because if you stop talking, they start to in their own heads blow any potential issue up out of all proportion. That value of talking, you know, you've, you've, I guess you've got more leeway out of people as a result of talking rather than ignoring them. Yeah, that's certainly good advice. I think it is about that is communication. I think that's what it's about with supplies on customers. Alan, just coming back to this business of short term over trading and stock stock loans. I mean, I know several companies at the moment who've got either relationship like Hugh was saying with with major retailers where they're ready to finance some of the stock they know they want built in as a contingency. What what are the options for smaller businesses, food and drink businesses who know they've got to lay down stock, but not sure how they're going to one how much is going to cost and then how they're going to finance it. Yeah, I think one thing that's coming out of this is that we're talking about short term cash, and we shouldn't fall into the trap of thinking that short term cash is something that you sort in the short term. Short term cash is something that you sort out in the long term it can take a long time to sort it out. So it's maybe a bit of an infuriating answer to some people who find themselves in difficulties, but the best plan of all is to plan to make sure you don't end up in difficulties. So we back I think full circle to your very first question of defined cash in the sense John that it's okay, you know the simple answer we know what cash is it's what in the petty cashed in and the balance in your bank. And then a step above that you have liquidity what you can get hold of fairly quickly collecting debt in and so on. And then you have facilities. And you know head in all of this has been mentioned before some just pulling it together if you like. And the concept of headroom has been mentioned. So the trick really is to in the long term and well before you really need to cover for additional stock or whatever it is coming back to your actual question. So you've got the facilities there to handle it, or if you don't have the facilities there to handle it to pull back on your growth, you know, you can't have it both ways. You need to plan ahead as probably has said that everybody else has said that don't hurtle forwards and then worry about where the cash is given from decide how much cash you've got and what you can do with it. So that means surely you've got to have management information systems that tell you which customers are worth more than the others. If you're going to if you can't satisfy everybody you've either got to be a bit strategic and say which customers are going to be there for the long term, or a bit short term and decide which customers give you the best gross margin. Yeah, absolutely. Again, as well as you obviously know, John, that is something again we can assist companies with. If they so wish we can apply, you know, going back to the model I mentioned that normally breaks down any business into its component parts to see which bits are the most profitable or which bits contributes most to the profitability. And if you absolutely must make a choice between two things. Yes, obviously you would go in favor of the one that is most profitable. Which brings me back to my pet subject of manufacturing the right stuff. Hugh, I guess, one of the things you'll know from the contact you've had with lots of food and drink businesses in Wales is that some people feel they've got to keep busy in the crisis and make just small batches and the like, not realizing that they push wastage figures up but also that the ingredients sometimes have more shelf life on them than the finished products and you're actually you can make matters worse by perhaps not doing what Alan suggested which is pick your customers and then make to order and try and preserve cash rather than manufacturing drive at waste. Yeah, and again it comes back to knowing your business and you have, you know one of the things this business is built on is knowing your margin per product if you know what I mean I think this comes back to terms if you're, if you're on a high volume small margin product that you're making 5% on you can't give a 5% discount for early payment either can you so you know it's understanding your business understanding your raw material, you know and then you know talking to your customers john as you're saying it's, you know we're a very different type of business we haven't got a lot of these problems you know we are doing the full fascia of Tesco's potatoes in Wales for example and you know that's much more regular business and you paid more regular so you know I, I don't have to deal with a lot of this stuff day to day but I suppose our, our middle ground kind of customers you know we, we just know those and we just keep speaking to them and I think it's not something to be embarrassed of john I think you know it's, you know it's price and terms, you know are other things coming not just price so you know speaking to those guys regularly and you know and even if they have a conversation going to look you know I'm waiting for payment that's hopefully coming this Friday so I'll pay you Monday you know it's not a difficult conversation to have that you know and I don't think anybody should be embarrassed about having those conversations. No and it usually feels better and it's a lot less stressful if you've had the conversation and you know for both parties at least they're talking to each other and they know what the situation is I think from personal experience both in both directions what Chris was saying about keep the dialogue going keep communications going is all is often a lot better for all concerned. Coming back to that business about manufacture do you do you get involved in terms of saying to the factory sometimes look, we need to rationalize and or be careful if we're in a crisis situation about what we make and how we make it, maybe not make everything. Yeah we do we do that as a continual process we have, even when we bring a new customer on board. Yeah, because often though you know they're not going to be one of the major retails, they're going to be smaller ones that require during a year, and we'll have an expectation of sort of volumes for those customers. And if the volume isn't sufficient to to manufacture efficiently, because it's disruptive if you know if we've got breaks in terms of change of us, then the whole factory gets very inefficient. So we tend to minimize the number of short runs that we do and therefore we evaluate our customer base on a continual basis to understand their profitability and we factor in into that profitability calculation. Obviously downtime from changes etc so it becomes a visible. So that salesman who brings in the shiny new piece of business you've got to sit down and reprice it effectively for the real cost and impact it has on the business. Exactly, yeah so we'll cost downtime into that assessment of that customer and we'll evaluate it three months later when it was supposed to grow to twice its volume. If it hasn't grown, we'll have that conversation with the customer and now we either, you know, we go back to the customer and say we will supply you a bit of this price because of our inefficiencies and you know it's rather than just cut them off, we'll offer them a price that reflects the cost of production. Yes. A dairy company I won't name used to have three categorized their customers into three and there was the strategic customers, the semi-strategic customers and the profitable ones. It's a bit of a, it's deciding how strategic you can be doesn't it, particularly at a time when cash is in short supply. Guys, we're heading towards the end, one of the things that I think everybody wants to know is what's going to happen between now and Christmas and not to put you too much on the spot but really what are the bigger factors that we should be thinking about as a food and drink business and what can we be thinking about as mitigation for them. Alan if I start with you and then we'll work our way around please. Yeah, well you asked me this question about a fourth time to go and I think I was the one that said I haven't occlude John, which really the answer hasn't changed because we might have a vaccine. We might have a second wave. Now there's a difference between those two polls as to what might happen but I think the real trick is to accept that we don't know. And although these are highly exceptional circumstances or situations that we in, it doesn't remove the fact that you really need to make your business as robust as you can as quickly and as early on as you can so that you are robust and can survive whatever is thrown at you and yes I do know that there are hugely exceptional circumstances as I said and you know wise words might annoy some people but that is the real trick. Make sure you are robust before you need to be robust. So remain in cash preservation modes. Don't do business unless you're confident that it's going to pay and maybe sit down with you season and season and maybe even look at contracts or any new business with a what we might call a cap or a collar and say that it can't go outside these parameters as either it'll disrupt our production or we won't make money unless it covers a certain volume. Or run the risk. The business is a choice at the end of the day. But a risk has got to be priced hasn't it? Yeah absolutely, it depends how risk-averse you want to be. I'm not pretending to be an entrepreneur and entrepreneurship is about risk-taking at the end of the day so you can be absolutely risk-free but be as robust. You know that the accountant in me is always going to say this isn't it? Be as robust if you possibly can. So however bumpy the road gets you're still there. Yeah well we always get a more excitement response from the bankers so Rodry I mean I guess you're you know notwithstanding what you've already said those things that we think are going to happen in the autumn. Would you rather people who you talk to be open and upfront about what they think those risks are and the impact they have on there? Which ones do you think they will be listing as top priority? Yeah absolutely Johnny we would expect people to be addressing these but as I mentioned earlier we also accept that you know you can't get it 100% spots on because nobody knows what's ahead of us. And I think it's probably fair to say you know we've never faced such a wide range of potential risks to the economy between Covid, Brexit, poor weather all sorts of things that could be ahead of us. So yeah as Alan said none of us know what's coming down the road or you know we could probably be very rich if we need that information but I think it's looking at the risks. You know notary businesses are the same so it's not about using a standard template or you know a certain model for all businesses. It's about identifying the risks in your business and looking what the impact would be and trying to mitigate those as best as possible. But also accepting that you can't mitigate all the risks in the business that there are going to be things that you can't fully cover and trying to manage those facilities or things in place that could deal with those if they crop up and then obviously you know we're all hoping that you know the winters going to be reasonably successful but with so many factors you've got to plan ahead. There's come back to forecasting and looking at sensitivities and making sure that you're a person got that headroom which Alan mentioned. And yeah one of the things we've been doing with with people is doing a simple model that just tries to describe what do we think might happen and the impact it might have as in it's how big an impact be on the business versus the likelihood of it of it happening. So it's even if you're just scratching it out on a whiteboard at least you've gone through the process of thinking what could possibly go wrong. Hugh, even though you've got those big customers and they're working in partnership with you, actually to be fair Tesco did pretty much have a plan for what might happen if there was a pandemic. Are you in a better position? What's the top tip that you would give for what might go wrong this autumn? I think it's coming back to what Chris said as well, John is you know we are spending a heap of time in this business planning now so we are talking to Tesco's and we've got a spreadsheet and going if you give us 24 hours notice we can do this if you give us three days notice we can do this. You know and then if we do have another panic buy or whatever we will do a massive very quick range rationalization we will drop half the smaller short run lines. You know as Chris said changeovers is a big driver of inefficiency in a business we get rid of all the small lines we will do bulk runs of all the big lines to be able to pile product onto the shelves. All that scenario has been done but of course the financial bit that sits behind that we've got to make sure we're covering all our own breads and we've got the matrices behind it to make sure we're making the right money through that as well. So all that work has been already been done with our largest customers. So you know it's something we spend a lot of time on here to make sure working with them to make sure the buyer can go to their boss within Tesco's and say look at all my bases covered for the four or five scenarios that could happen for Christmas so it's been a good supply to our customers I think as well. And what do you use as a source of information I mean work because sentiment and particularly the consumer sentiment into the autumn can have a big factor in whether people go out what they buy what they shop for what do you get users a sort of bell weather for sentiments. I suppose we're getting some historic information now John you know we saw the last panic buy we've seen the current flow now through the retailers you know we are starting to get kind of data sets of what we think might happen you know we know what we know what Tesco's store in Halford West sold for the worst four days of panic buying if you know what I mean we know what the stock availability was throughout that day so we know what if the shelves have been full all day what they would have sold so we can work back from those figures we use in we use. Yeah if you're a smaller business and you don't have access to that sort of market data I mean you and I've got previous in other organizations where there's been sort of economic data kicking around what do you you know what do you use as a bell weather for what you know which to what's the direction of travel here. Read the Sunday papers John you know it's you know literally in the time we've got a good management team here you know we all just will sit around the table and have you go well you know this. Boris Johnson has tightened everything in England you know are you know are we heading towards a you know a more retailer focused Christmas again you know because the food service sector is not working at the house. That's a conversation we had on Monday here now you know so let's retweak our volumes for Christmas yes we did that on Monday. It's been live and you know seeing all the information that's in front of us. Chris what's what what's going to happen between now and Christmas. Well as Roger and I said it's hard to say what's going to happen but I think our concern is probably supply chain disruption because I think it'll be different if if we do get a second spike in covid and Brexit later on. I think they'll be localized lockdowns because of covid which can cause you know potentially you can see where a site a manufacturing site gets closed down because it's got a high infection rate. Similarly that disrupts the whole supply chain that that's feeding into. So you know from our perspective we see the high risk of supply disruption on us from one of our many ingredients suppliers within the UK if they're not if they go into lockdown in a certain area. We can manufacture we may not get the supplies we need. So I think it's about managing that risk from our perspective in terms of getting dual supply in place and there's some alternatives. So I think there will be a full lockdown I think it'll be localized and that will cause not total disruption but specific supply disruption. Yeah I think the for the smaller businesses is it things like storing stock off site and or finished stock away from the premises in case you do end up in one of those situations or at least those sort of things. Yeah I mean that was when we had the last Brexit concern wasn't it. We have a lot of cash tied up and manufacturing output rose temporarily in that quarter due to people just piling up stock and did down the second quarter after that when it wasn't needed. So, you know, hard to say really I mean, if you've got the cash and funds to do that and you can safely store money and major risk like that, you could do it. But most companies don't have that headroom or the cash available to put it into stock piling. So it's about, you know, managing it without using cash almost is a challenge I think. Yeah, so maybe getting your customer to store it for you and then invoicing them as they draw it off. I mean, that's worth saying I think for everybody is that that's one of the things the investor ready program is therefore is helping people talk through some of those issues manage those risks and how they're going to impact on them financially so anyway as I'm going to draw it to a close one word top tip for everybody before before we leave Alan top tip. Make sure you got your facilities in place. Yeah. Roger top tip. If you stuff plenty of time to deal with any problems. Yeah, yeah, time on the ball. You top tip. Keep planning. Keep planning. Yeah, forecasting. I think it's the overarching theme for all of these webinars really isn't it Chris. Yeah, I think it's about visibility really I mean understanding what's happening in your business in the next three months, six months. So you know what's coming around the corner. You can plan for that as I think Roger said no one no one can turn up on a Monday mornings to the bank or anyone saying we've run out of cash you know you need to be looking at that month at least you know. I think that's great. I think gent gentlemen can I thank you all. It's been, I think it's fascinating subjects I think it's going to get more interesting as we roll into the autumn. Thank you very much indeed for your time and attention to everybody else thank you very much for rocking up at this time in the morning. I hope we've made this interesting and hopefully giving you some insights and some ideas you know where we are if you want to talk about these issues further. Just to remind you that we've got a couple more of these we've got one on around the 9th of September which is going to be looking at e commerce as in the financial implications. One of the things we've learned this year is that a lot of food and drink businesses have been online and trying to make it work. Does it work. What's the best way what are the financial models for that. That's what we're going to look at on the 9th of September. Once again, thank you to everybody. Thank you for giving up your time and your attention. Thank you.