Surviving a Crisis and Planning for What’s Ahead
Depending on when you started counting, we are about eight months into the COVID-19 pandemic. In the intervening time, many businesses have experienced temporary shutdowns, supply chain issues, reduced cash flow and a chaotic Paycheck Protection Program (PPP) loan process – just to name a few of the challenges. To survive uncertain times like these, and plan for a brighter future, follow this blueprint:
Prioritize
Consider the health care workers on the front lines of this crisis. When faced with many patients, they triage based upon the severity of a person’s illness. When your business is faced with a barrage of challenges, try writing them all out and assigning degrees of urgency to focus your attention on what matters most.
For many businesses, ensuring sufficient cash flow will be their highest priority. A business’s cash position will determine whether they see the other side of this pandemic or fall victim to it. If you are less than confident in your cash flow, there are a few actions you can take immediately to improve it:
Try to collect on outstanding receivables; consider factoring your unpaid invoices
Take full advantage of payables terms from your vendors
Consider applying for government relief programs or other debt financing
After you have addressed your immediate cash flow needs, you can begin to look toward ensuring strong cash flow into the future.
Plan
Given the uncertainty that is so prevalent today, consider scenario planning exercises to assess how your business will fare under different assumptions. Develop multiple financial forecasts and cash flow projections based on different scenarios. Among other things, your models should consider:
What will future demand for your products or services look like?
What would happen if your business were included in a new round of government-mandated shutdowns?
How would you adapt if one of your largest customers or vendors ceased operations in the next 3-6 months?
What cost-containment measures can you implement?
Communicate
Once you have prioritized and planned your path to recovery, you must communicate it. Reach out to your accountant, attorney, and other business advisors to get their input. Reassure your customers and vendors that you are prepared to withstand these difficult times. Make sure your employees know exactly how you will handle the situation if they or their coworkers begin to fall ill. Let them know how you will handle layoffs and compensation issues. You should be honest and straightforward with all stakeholders and be transparent about the rationale behind difficult decisions. Make sure to continue communicating at a frequency that makes sense for your business.
The news about the pandemic is constantly changing, but the one thing that seems certain is that we are going to be dealing with it for many months to come. Schreiber Accounting and Advisory can help you navigate through stormy seas with comprehensive or à la carte virtual CFO services, including cash flow optimization, forecasting, business planning and more. Contact the firm for more information.
Material discussed is for informational purposes only. It is not to be interpreted as investment, tax or legal advice. Individual situations vary, and this information should only be relied upon when coordinated with individual professional advice.