Cash Flow Crisis Management: Best Practice

Article by Dianne Brown

 

As a business owner, there’s one key thing you need to focus on wholeheartedly right now – keeping your business alive during these difficult times. Cash flow crisis management and financial management will be crucial to ensuring business sustainability throughout the COVID-19 crisis.  And whilst the benefits of the various stimulus support packages are beginning to trickle through, your ability to manage your cash flow will remain a critical determinant in your business success.

We’ve put together an essential  10-step cash flow crisis management process to ensure your business is best placed for financial success during uncertain times:

 

Step 1: Forecast 

Prepare a monthly Cash flow Forecast for the next 12 months.  You may also want to consider some “what if” analysis that takes into account different scenarios such as best case, worst case etc.  Identify potential cash flow issues before they occur and put in place strategies to address the shortfall.

 

Step 2: Leverage Government Support

Ensure you maximise your cashflow by accessing all eligible Federal, State and Local Government COVID-19 stimulus support packages.  Explore new or additional financing options that may be available to you in order to support your business over the next 6-12 months.  For example, consider contacting your bank to access the Federal Government Coronavirus SME Guarantee Scheme loans that are available up to $250,000.

 

Step 3: Review Tax Relief

Review any ATO tax relief options that may be available to you.

 

Step 4: Request Reductions (Business)

Review your existing finance arrangements and discuss potential reductions with your existing bank and financiers in terms of your loans/leases.

 

Step 5: Request Reductions (Personal)

Discuss with your landlord the possibility of accessing rent deferrals and/or reductions.

 

Step 6: Regularise credits, Defer Payments

Review your trade terms to bring forward cash receipts and defer your cash payments.  For example, do you request a percentage fee payment up front on all new contracts?  Can you issue progress fees throughout the job?  Reduce your standard credit terms on your invoices.  Review your contact points with your Debtors and establish regular payment plans.  Contact your creditors to discuss potential deferral arrangements.

 

Step 7: Review your Variable Costs

Generally speaking, reducing your variable costs will have a faster impact on your cash outflows then your fixed costs.  Consider conducting a waste audit on your business to improve efficiencies and reduce costs.

 

Step 8: Review your Business Insurance 

Do you have business interruption insurance and if so, are you eligible to make a potential claim?

 

Step 9:  Review your Revenue Streams

Are there alternate revenue streams or markets that may be available to you?  How can you pivot your business model/ product/service offerings to take advantage of some of the opportunities that the current crisis presents?

 

Step 10: Constantly Review and Reassess

Monitor your cash flow on a regular basis (weekly or monthly).  Review any potential variances between your forecast cash flow and actual cash balances and develop action plans to address potential cash flow shortages.

 

Contact SRJ Walker Wayland for Cash Flow Crisis Management Advice

These cash flow crisis management tips are best practice all year round and should be maintained after this pandemic passes. If you would like to know how SRJ Walker Wayland can help you to create strong financial management practices in your business, please contact our office on 07 3490 9988.