COVID-19: 4 Aspects To Check To Manage Cash Flow

Business disruptions are nothing new in regular operations, however COVID-19 has caused more than its fair share of problems. While some of it has been blown  over the past months, there are still daunting challenges that companies will be facing.

One of those big aspects is your employees’ safety for sure. But a close second is your cash flow. After all, if you can’t pay your workers well, then their financial situation could be in jeopardy as well.

With this in mind, managing and assessing your cash flow during these times should be an ongoing exercise and checked on routinely. You want to make sure that you are keeping up with this changing world and that you can keep the lights on.

In order to properly assess and manage your cash flow, you’ll want to examine all aspects of your business. You’ll need to consider whether policies and processes need to be changed or not. On top of that, you’ll also have to look at these four aspects: customers, vendors, other liabilities, and your fixed and variable costs.

Below is a break down of what to be looking at.

Your big source of income is the people who are buying from you. As such, you’ll want to spend a lot of time and thought on them.

First, you’ll want to determine the likelihood of the customers even paying. You’ll need to contact them of course, but before calling them, check your internal policies. Make sure that the policies that you have in place are flexible enough for most customers. The big thing is to monitor the payment agreements and make changes as needed.

The second thing to consider is the difficulties the customer is facing if they are missing payments. One thing you might have to accept is setting up an allowance for uncollectible receivables. Worse is writing them off as bad debts. This can impact your cash flow so do spend some time thinking about whether customers inability to pay is a larger concern for the short term.

The final thing to consider is the overall impact that customers will have to your business. Particularly in respect to them being able to pay you or not. If you find most of your customers can’t pay, you may need to look at some short-term cash solutions. From loans to financial relief from the government. Whatever you decide to do, make sure to factor in other costs associated to those options.

When it comes to vendors, the big thing is being able to pay them at a reasonable time and not have it destroy your finances. With this in mind, consider when those payments are due and reach out to the vendor to see if you can make arrangements to payment terms. If it’s not an issue, keep doing things as normal, but don’t be afraid to make adjustments if you need it.

Similar to vendors, you want to ensure that you can keep up with the payments. If you find it difficult to do so, reach out to the lender to see if there are any relief packages available. Things like deferring principal repayments for a period of time are worth checking to see.

The other aspect to check is payroll. Do you have enough cash on hand to cover the pay for your employees? Thankfully, the government has provided relief in this area if you need it. This comes in the form of the Canada Emergency Wage Subsidy or Work-sharing program. You can get more information about it here.

The last aspect to consider is your fixed and variable costs. With fixed costs, knowing the amounts and what they are helps a lot. Even though in the grand scheme of things, you won’t be able to change them much.

That being said, variable costs are very fluid and can be controlled easily. When looking at these costs, there are two big questions you can be asking yourself in those situations:

If you have a financial or business advisor, consult them on this. They understand the ins and outs of your business in terms of finances and can help you manage this.

On top of that, you’ll also want to keep your bank informed of your plans and results. Keeping communication open and transparent goes a long way. Beyond building trust, it allows you an opportunity for both to find a solution together.

By keeping these aspects in mind and finding the best way to manage them, you’ll learn to manage your businesses cash flow during these harder times. Fortunately, there are tonnes of relief packages available and many people are understanding of these situations. All that you need to do is reach out.