Coping with COVID-19: Tips on maintaining cash flow

In order to keep Ottawa business leaders informed on best practices amid the unprecedented COVID-19 disruptions, OBJ publisher Michael Curran will be conducting a series of video panel discussions over the coming weeks with local business experts.

In the first video of our Coping with COVID-19 series, OBJ digs into an issue that’s top of mind for many local business owners ​– maintaining cash flow during an unprecedented global pandemic.

The panel discussion included Micheal Burch of Welch LLP, Sean Murphy of MNP and Ken Tammadge and Rosa Iuliano, both of Baker Tilly. Here is an edited transcript of the panel. The full discussion can be accessed in the video.

OBJ: Micheal, let’s start with you. Are you hearing from your clients and, if so, what are their concerns?

BURCH: I think their major concern right now is cash flow. What should we be doing to prepare ourselves for this? How should we be getting ahead of this? Understanding what the effects are going to be. How long is this going to last? That's what we're hearing.

OBJ: Sean, would you agree with that?

MURPHY: So we're absolutely hearing the same thing Micheal is hearing from our clients. I think it also goes one step further. How do we mitigate some of the things around cash flow, but more importantly, what do we do about our teams or workforce? Fundamentally, how do we operate the business knowing that we're going to potentially be dealing with less? That is a real challenge.

OBJ: Rosa, let me ask you. Have you received questions from clients? If so, what are they concerned about?

IULIANO: Clients are very concerned about what's happening in the public markets and what's happening to their portfolios. Other clients, I think, are very concerned about how to deal with employees, people who are staying at home. What are their obligations? How are they going to manage cash flow? How are they going to keep a business functioning if the business isn't open on a day-to-day basis?

OBJ: Those are very real-world concerns. Micheal, Ottawa is very much a city of small businesses. We have some global companies, but the majority are smaller players. If you were speaking to a client today, what basic advice would you give them?

BURCH: I'd start with having them stress test their projections for the next six months. I would go through my customer list and I would ask: who’s most likely to be most affected by this? Who’s likely to not feel the pinch immediately, but perhaps later on? And then put that into the cash flow. If I can expect that 60 per cent of my clients are going to be business as usual and maybe 20 per cent are going to be hard done by. So do some regression analysis to determine the worst-case scenario. Sales could be down 30 per cent and receipts delayed 45 days. What does that do to our line and do we have sufficient cash flow? What steps do we need to take internally to make sure that we can match up and continue to operate?

OBJ: Sean, let’s get you to weigh in.

MURPHY: The next step is really around looking at your discretionary spending. What are the things you can defer in terms of spending that you might be looking at? It could be an investment you had lined up for the end of the fiscal year. Maybe big-ticket items (get) delayed until we get out of this current situation.

OBJ: Ken, let’s get you in this discussion around practical advice.

TAMMADGE: We know this is going to impact the income statement. Where the focus should be, however, is on the balance sheet. I think that’s where you need to be concerned. Your ability to continue operations, so that's looking more at the balance sheet side of the equation and asking: What is my line of credit and what's the ability to obtain financing? Knowing the net income is likely to drop for the majority of businesses in some way, shape or form. Cash flow is going to suffer. There’s a bit of a switch from the income statement to the balance sheet.