Your 3 Step Guide to Pandemic Cash Flow Management

While small businesses are especially vulnerable to the financial impact of the coronavirus, organizations of all sizes are trying to stay on top of the changing economic landscape. Whether you’re battling beyond pandemic paralysis, or you’re arming yourself with information “just in case," here are 3 financial tips to help you manage cash flow:

1. Seek Funding 

Just last week, an additional $310 billion was approved to augment the government's depleted Payroll Protection Program (PPP). If you didn't receive funding in the first round (the program offers 8 weeks of payroll help for companies with under 500 employees), you should make sure you have all required documents ready and submit them as soon as possible. This new bill specifically delineates funds to community lenders and mid-sized banks and credit unions. Many applicants have found the process easier to navigate with their local banks.

Outside of the Payroll PPP, other SBA programs have been enacted, and augmented, to address COVID-19’s impact on small businesses.  These include the Economic Injury Disaster Loan (“EIDL”), the Emergency Economic Injury Grant (“EEIG”), and the Express Bridge Loan Pilot Program.

Beyond the SBA, other resources  being offered include:

1. Facebook Small Business Grant Program, which is drawing from a pool of $100 million for up 30,000 small businesses grants to eligible applicants.
2. Alice is providing small business grants up to $10,000 of emergency funding, and up to $50,000 to support business growth.
3. kiva is providing zero interest loans to US businesses.
4. thryv foundation is providing grants up to $15,000.
5. Sara Blakely’s Red Backpack Fund is offering 1,000 $5,000 grants to female entrepreneurs each month through August.

If you are a larger business, generating in excess of $2 million of cash flows, there are a variety of other debt and equity funding sources available as private financing firms continue to search for great companies to partner with.

Not sure who to partner with or what funding you might need?
The ScaleHouse team is happy to help you explore those options.

2. Build and Continually Update Your Cash Flow Forecast

A working cash flow forecast is essential for making and understanding the impacts of business decisions. A proper cash flow forecast should be able to test a variety of operating and working capital scenarios and outcomes. During a dynamic environment, we recommend having a 4-week, 8-week and 12-week forecast to provide more granularity. 

Remember, cash flow needs to account for changes in working capital, such as inventory, accounts payable and receivable, and not just categories like operating expenses and revenue. If you need a better handle on how these interactions work and critically apply to the day-to day of your business you’re not alone, we’re always happy to chat or build you a custom model.

3. Take Active Steps to Improve Cash Flow

Adapting and making changes quickly can be a differentiator if you’re in survival mode. Of course, making changes is easier said than done, especially when adjustments require agreement from another party, like modifying terms with vendors or trying to collect cash from customers faster than usual.  

Once you have a proper understanding of your cash flow, you can understand which changes will be most helpful. You may be able to:

1. Reduce Operating Overhead: Lowering expenses, wherever they come from will improve cash flow.
2. Renegotiate Terms with Your Suppliers and Creditors: If you believe you can temporarily extend payment terms, whether it be with a creditor, landlord, supplier, etc. without jeopardizing a long-term relationship, it’s worth having this discussion immediately. For those using or extending credit cards or credit lines, Experian offers a helpful list of links summarizing temporary relief options offered by short-term credit providers.
3. Collect on Accounts Receivable Faster Than Usual: This is easier said than done, as many businesses are going through similar discomfort. Consider incentivizing customers by offering a discount (1%-5%) for early payments on larger contracts or orders.
   
   

The amount of information, and misinformation, available right now can be overwhelming, especially when things are changing on a daily basis both inside and outside of your business.

The most important tip is to not feel like you
need to figure this out on your own.

Whether it’s the ScaleHouse team or some other internal or external advisor, ask for help. We’re all in this together.