We negotiated payment breaks to soften the impact of coronavirus
The Travelwrap Company founder Niamh Barker negotiated new payment terms with her suppliers to get through the financial blow of coronavirus – and came out more profitable as a result.
As early as February, Niamh noticed a difference in her customers’ attitudes towards the luxury travel products. Then, with lockdown, sales stopped altogether for a painful three or four week period.
One of Niamh’s first priorities was to address the company’s finances. As well as looking at every single line of the accounts and pairing back wherever she could, she also spent time calling suppliers.
“I remember making phone calls on day one or two of lockdown, before I felt everybody else was going to get in the door. I knew that I needed to have those difficult conversations with people outside of the business early on,” she explained.
Negotiate payment schedules
The company’s main partner is Johnstons of Elgin, a Scottish cashmere supplier. Together, the two businesses went about rewriting the payment schedule, giving The Travelwrap Company a much-needed break from paying invoices.
Despite already having great terms in place, with 60 days to pay her invoices, Niamh needed longer to deal with the drop in sales. Johnstons agreed to a two-month payment break and even continued to hold around £150,000 worth of stock for the business in the meantime.
“They were really supportive – as a much bigger business, it felt like they were almost mentoring us. I spoke to the commercial director every week at the beginning of lockdown and had really clear communication with him about how we were doing – and it wasn’t always good news.”
Address expenses one by one
Niamh recalled how she went through every single expense individually, cutting costs wherever possible.
This included further difficult conversations with consultants, such as her financial director, who also offered to take a payment break while continuing to work. Other suppliers, such as the company’s packaging supplier, also held back from issuing invoices for a couple of months.
“It helped me to focus on what we needed to do and where we needed to go, and I just kept reviewing that. I knew that if I was honest with the people who we have worked with for years, they would be in our corner – and they all were.”
Map out a new financial forecast
Next came the tricky process of reforecasting for the rest of the financial year. Niamh mapped out three different scenarios – best case, middle case and worst case.
All this painstaking work has paid off – the business is at 90 per cent of the revenue it brought in by this time last year. And, while sales are down by 25 per cent since the start of lockdown, the company is in a more profitable position thanks to all the overheads that have been cut.
“This year we’ve made a reasonable profit and financially I think we’ll be in a better place by the end of the financial year,” said Niamh. “I wouldn’t recommend it – I’m doing the job of three people while the furlough scheme is in place – but it’s kind of worked for the business.”
It pays to take a human approach to business
Other plans to develop new product lines have had to be put on hold for a while, but Niamh believes the business will still move on – albeit at a slower, more measured pace.
In the meantime, she continues to analyse the accounts and have those difficult conversations.
“They’re not as big and as difficult as they were, but I’m still doing it. And our relationships are better than ever because I’ve kept reaching out. It pays to be connected – even with big suppliers, everybody’s human and has got their own stuff going on.”
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