Managing Cash Flow and Transactions During a Pandemic

Following are key takeaways from Part 2 of our Business Health During a Pandemic webinar series. Watch the video here.

  • Stay healthy, take the advice of health experts seriously
  • Remain calm but act now – don’t wait
  • Key is just surviving and weathering the storm – ideal is to thrive
  • Learn as quickly as you can
  • Partner with:
    • Advisers
    • Suppliers and lenders
    • Existing and potential sources for referrals
    • Donate use of space and/or materials
    • Sources for new products and markets – such as alcohol distillers partnering with soap and perfume manufacturers to make hand sanitizers
  • Opportunities:
    • Strengthen relationships with clients
    • Focus on what your business does best
    • Competitors withdrawing from market
    • Businesses can redefine themselves – look into new markets, tools, ways to deliver products (e.g. online events)
    • Automate, reduce people
    • Data mining and analytics
    • Urgency resulting in relaxation of rules and regulation – faster to market, expanded options
    • As an independent consultant, this is your opportunity to show people the way
  • Innovation:
    • E-commerce as a revenue stream – Larissa Rapoport recommends on focusing on this first, expects them to see a spike in sales
      • Amazon – highest recommendation
      • Facebook
      • eBay
      • Etsy
      • WooCommerce
    • Ease cash collection (if not using the services above)
      • Square
      • Stripe
      • PayPal
    • Online communication tool for engaging internal and external customers
    • Help other companies innovate or take advantage of opportunities
    • Go out of way to add value to what offering or delivering to client, even if delivered for free, in order to build relationships and good faith
  • Strategic approach to cash:
    • Protect receivables / money coming in – call clients now to negotiate terms
    • Try to reduce A/R (convert to cash) and boost A/P (reserve cash)
    • Cut dividends
    • Private companies, do capital calls with owners to get money in
    • Borrow – go to secondary markets (higher interest rates) if don’t have a line of credit
    • Spend on producing revenue and keeping employees
    • Focus on social media promotion as a lot of people are spending time at home/in place on social media
    • Eye towards long term survival because we don’t know how long this will last
    • Prepare for a long winter and prioritize expenditures accordingly
    • Be first in line to negotiate with vendors, before companies no longer have wiggle room
    • Consider alternatives to cash, including bartering services
    • Insurance (business interruption, if plan has a civil authority clause)
      • Track your losses to take advantage of any government relief programs
      • Document all direct and indirect costs – cancelled orders, delayed orders, monetary time on managing business interruption, etc.
      • Appoint one person whose sole responsibility is dealing with business interruption, produce cash flow projections at least weekly, looking at fixed costs and negotiating them, rethinking how business is run, reviewing variable costs and how they can be reduced, only necessary costs (don’t take on unnecessary costs), get as much cash as you can, SBA loans if necessary, look for tax incentives, significant tax benefits available from advanced industry accelerator grant.
  • Evaluate financials for risk factors:
    • look at largest clients and source of cash, communicate with them frequently so that they remain a source of cash
    • Reduce cash outflows, start with big numbers first
    • Payroll, contractors, and consultants
    • Partner with companies that have provided good and steady insight in the past or companies with expertise in helping companies optimize business outcomes
    • Challenge every category in the financials for room for improvement
    • Get buy-ins from every team in your organization
    • Create proforma financials you can use as a roadmap for credible lenders and track success of workout plan
    • The two biggest reasons businesses fail or turnaround is because you never made a product someone wanted, or your business model doesn’t work. The longer you deny reality that your target has moved, environment has changed, and/or what you’re doing no longer works, you’ll go out of business or end up in a turnaround situation
  • If you were in the midst of a transaction (M&A, IPO), leaders recommend forestalling if you can rather than letting fall apart – be transparent, set expectations, a lot of communication – actions during a time like this could backfire; on buyside, trying to get a steal could result in “disastrous” integration that doesn’t supply the ROI you were seeking
  • The future (changes we might see):
    • Potential changes to healthcare: process automation, tele-medicine, machine learning, population health management, bio-banking, symptom checkers, remote care
    • A lot of things we don’t need will be eliminated