Cash flow management in a crisis period

COVID-19 is not lone event as a shock to a company’s system but it is a major one and cash flow issues will arise, how will your business manage the situation. Your company should develop a treasury plan to manage your cash flow during this time. We will explore strategies you can adopt to better manage your cash flow.

Review your financing options

Even if you have enough cash to survive a few months you should take the time to talk to your financing institution to make sure you have financing options in case you need to go that route. Look over your cash plan to understand how much it will sustain your business, and by knowing how long your company can go with the cash you have you will know if the financing options you are given will be viable or you will have to seek other options.

Look into your receivable

Now is the time to look into how your receivables are being managed. What steps are you taking to minimize the aging of your receivables. It can be that you are not running an electronic based invoicing or payment system and you may want to rethink that, so invoicing and collecting payment becomes easier. Review your aging receivables and consider penalties for late payments and for those accounts receivables you can write off, consider selling them to a collection agency.

Assess your costs

Assess your variable costs, which are costs that do not include a fixed amount you have to pay every month or year. Reduce how much you spend on things like business lunch, hiring costs, travel costs etc. Find ways in which your current staff can be of help in areas you were consider hiring. It will also help if you can convert your fixed costs to variable costs.

Put a hold on your payables

Communicate with your suppliers and see how you can work with them to delay payments so you can hold on to more cash, there will be those you have longstanding relationships with that will be willing to work with you. It gives you the time to plan accordingly once an agreement has been reached with your suppliers.

Manage your inventory better

Many of your suppliers will be experiencing material shortage at this time and for sometime in the future, how ill this affect your supply and what can you do to mitigate the effect of this on your business. You can check out this article on how you can manage your inventory better (link). During this time of crisis you will have to review how you can balance the demand you foresee to how much inventory you need in stock.

Think outside the box for revenue streams

After forecasting demand to be conservative consider reevaluating your revenue stream to find ways you can pivot to markets that you may have not considered before. How can you use your assets to generate revenue, especially if they are becoming idle.

Consider selling your assets

You have exhausted all your options and you are still having cash flow issues you may want to consider selling some of your assets. This could be a last resort after thoroughly considering your options as this may be the best time to get the most out of selling your assets. The most important thing to keep in mind is that there are many options before you decide on doing this.

Cash flow management will be at the forefront of most businesses assessment plan to deal with the pandemic but more importantly to deal with life after it. Taking the time to assess these factors would help you run your business during this tough time towards recovery.

Bolaji Oluwajana is a lead accountant at Support Accounting Services,

www.supportaccountingservices.com