Strategies During Economic Downturns: Managing Cash (It’s Still King!)

We’ve had a variety of conversations with clients on loan applications, forgiveness, maximization, compliance requirements, and tools that can be used to navigate this environment through the near and longer-term future. (See our PPP Loan Forgiveness Highlights for details and definitions of loan forgiveness)

During times of financial challenges – like our current one – a critical component that companies must perform in the short-term is to analyze, control and maximize their cash resources. Now, more than ever, businesses need to protect the cash flows of their businesses. Protecting your cash inflows and outflows isn’t an easy process, but it is something that is critical to properly evaluate the endurance of your business. Below are some critical steps you can take to maintain and maximize a strong cash flow.

• prepare a rolling weekly cash flow report for a 13-week period
• examine all cash disbursements to determine what can be deferred or canceled, including automatic ACH arrangements to determine continuance
• review all monthly state and local tax payments for sales, use, etc., where they may be an opportunity to reduce the required payment
• review terms with vendors and suppliers to determine the best economics, as well as cash flow impacts of these terms
• review terms of loans with financial institutions to investigate other options available, such as interest-only payments
• review all lease agreements with landlords and/or suppliers to look at other opportunities such as deferral of payments, the forgiveness of rent for a certain period with a lease extension at the end of the lease, etc.

For the mid to long-term future, companies should focus on these components:

• working capital requirements
• inventory control and turnover
• accounts receivable and payable terms
• developing plans to create liquidity reserves for a possible economic downturn
• reviewing employment levels
• labor productivity measurements
• incentive plans around improved efficiency
• scheduling work to ensure high productivity with employee accountability

We know that instituting options like these aren’t always easy. We’re here to help. We’re working with clients to help implement best practices and innovative solutions for success. Contact your BMF Advisor to discuss the best option for your business.

Check out our Q&A sheet on loan forgiveness to help answer any immediate questions you may have. Visit our COVID-19 Resource Center for additional information and resources for you and your business.