It’s All About the Cash Flow

The business world has been turned upside down amid the COVID-19 pandemic, in particular neighborhood businesses in the hospitality and entertainment industries have had their lifeline taken from them. The lifeline of any business is its cash flow. Bonnie & Clyde didn’t rob banks for the toasters!

Business owners need to quickly perform a cash flow triage and formulate a plan to get their business back in operation quickly once the crisis passes. Like a bad combination of the Twilight Zone and The Big Bang theory, this calls for multi-dimensional chess and all the information you can bring to bear.

The process starts with a 13-week cash flow analysis. If this is shocking, then you grasp the challenge that confronts you. You must understand the obligations that confront you for the next 13 weeks . What’s fixed? What’s manageable? And what’s discretionary? Like a bad algebra test you need to write it all down, show your work and explain your assumptions.

Now you need to consider how all of this will be funded:

• Do you have lines of credit?
• Can you renegotiate existing lines?
• Will your landlord defer rental payments?
• Are their government programs you can access?
• Are the legitimate alternate lenders you can use such as factors?
• Can you negotiate better payment terms with your vendors?
• Can you defer payment to vendors?
• Can you accelerate payment from your customers?
• What expenses can be deferred?
• Will your employees accept a restructured compensation plan?
• Can you attract strategic partners willing to invest capital?
• What can be done to derive new revenue streams?
• Are there non-productive assets that can be sold?
• Is the pre-crisis pricing of your goods or services still accurate?

These questions are just the tip of the iceberg and that there are many more questions to consider as you triage cash flow during this pandemic. Be sure to solicit the input of your key stakeholders and local Chambers of Commerce. Businesses need to actively manage their cash flow and liquidity needs as they struggle to stay the course.