Navigating Cash Flow Amidst COVID-19 and Beyond

“Wisdom is knowing what to do next. Skill is knowing how to do it. And virtue is doing it” – David Starr Jordan
Read on for guidance on your next steps:

As you navigate the business challenges resulting from the pandemic, you may have been funded for the PPP loan and/or received some of the EIDL grant/loan money. I hope that if you needed it, you were funded. The business owners I am speaking with are faced with the good news of receiving the money and the bad news that businesses are still sheltered in all the way through June in some states. What now? How do you work towards qualifying for the PPP loan forgiveness if you only have eight weeks to do so and you still aren’t open for business? And more importantly, how do you protect the health of your business beyond that timeframe?

Examine your PPP Loan Forgiveness

If you received a PPP loan, you should already have a plan in place for how to best utilize the money. Explore what are eligible deductions that you will be allowed to take when you file for loan forgiveness. It’s important to understand now what the eligible expenses are and how will they be calculated. Collaborate with your cash flow specialists, CPA and banker who helped to get the loan funded. Working with your team of subject matter experts will serve you well.

Become One with Your Cash Flow

We don’t mean to imply that you have been ignoring the importance of cash flow until now, but the stakes have never been higher and it’s crucial that you understand the ins and outs as well as the possibilities for what might happen. Consider running scenario analyses on your cash flow forecast to determine how it affects short-term liquidity requirements. This can help you determine your company’s ability to pay off short-term liabilities, allowing you to plan with precision. You’ll want to consider that if you did receive PPP funding, that will likely not sustain you past a few months. Once you can manage these components, then you are ready to project what will be needed in order to sustain your business. Resist the urge of going back to your old ways of managing cash flow with more debt.

Be Vigilant on Cost Control

Cost-cutting measures can often serve as life rafts in turbulent times, but it’s important to weigh the benefits before slashing expenses. It may make sense to reduce your company’s travel budget with the increased use of video conferencing. Many major events and meetings have been postponed until next year or have shifted to a virtual platform. Also consider examining non-essential costs like online subscription services or office snacks. On the flip side, it likely doesn’t make sense to eliminate your bookkeeper. Yes, there is a cost associated with that resource, but is it wise for you to take on that extra responsibility right now? Cut the costs that cause inconvenience or annoyance, not those that are critical to the health of the business’s health functionality. Too, make sure that the measures you’re looking to cut don’t actually bolster revenue in a way that may not be readily apparent on the surface.

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Centennial Revenue Management has tools to help, including templates and spreadsheets to help organize your PPP usage and monthly forecasts. Contact me today at drobinson@centennialrevenuemanagement.com or at 303-835-7992.

A CFO/Cash Flow Expert can help you identify the important components of your cash flow arena that need special attention in the next 30-60 days. In order to be proactive – not reactive – it’s necessary to understand what your financial position was going into the pandemic. Were you already having a cash flow problem? What was your starting cash balance going into April, for example, before you received any funding? What were your average revenues coming in against the average outlay of cash going out (including debt servicing)? All of these questions tell the story of how your business was managing cash flow before COVID-19, and will help you to navigate the future of your business.

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