Eight steps to building a stronger company amid a cash-flow crisis

numbercrunch
Editor's Note

This article is sponsored by numbercrunch. 

As the initial economic shock of COVID-19 passes, many entrepreneurs and business owners continue to grapple with persistent challenges stemming from the lingering uncertainty brought on by the pandemic.

Frequently topping the list is maintaining predictable and sustainable cash flow levels at a time when many companies have limited visibility into the future.

As an advisor and virtual CFO to dozens of startups, scale-ups and other organizations across the National Capital Region, I’ve seen business owners apply their creativity and ingenuity to successfully navigate through a cash flow crisis.

The common thread? They acted swiftly and decisively, ensuring they maintained sufficient liquidity to not only keep their lights on, but ensure they have the resources to invest in future growth.

Here’s where to start:

  1. Get your financials up to date so you know where you stand. Does the very thought overwhelm you and your staff? If so, outsource it. It will help you sleep at night. 
  2. Review your spending and separate everything into two categories: essential and non-essential. Be tough about this categorization. And then start staging out non-essential spending cuts so that you are prepared to cut. Never before has there been such an opportunity to reconsider every payment. Involve your team in this exercise for the greatest impact.
  3. Review your customers and segment them into various categories based on profitability, strategic fit, etc. Even if you are normally focused on investing in long-term customer relationships, you may need to make some very difficult decisions in order to ensure your business gets there. 
  4. Don’t go it alone. Reach out to trusted advisors to get feedback, ideas and recommendations. Advisors talk to many businesses and are able to pass along the good ideas that they hear about. Knowing what others are doing can be calming and help build your confidence. 
  5. Revisit your pricing model to see if there are opportunities to speed up customer payments or sustain customer revenues with extended payment terms. Segmenting customers based on their ability to pay may be necessary during these uncertain times.
  6. Revisit your original 2020 strategic plan. Now is not the time to stay the course if your plan depends on certain conditions that are no longer realistic given the impact of the pandemic. Nor is it the time to kick strategy to the sidelines. Go back and sort out your plans into categories – start, stop and continue – to make sure you are not overlooking anything.
  7. Automate where possible – and automate where impossible. Necessity is the mother of invention and this crisis will spawn incredible business innovations. There is nothing stopping you from inventing the next best thing.
  8. Negotiate with your creditors. Protecting cash flow means revisiting every agreement to explore your options. 

Over the last few weeks, we’ve all likely received well-intentioned motivational messages about never letting a good crisis go to waste, or how generational-defining technologies are often developed during economic downturns.

Even if those aspirations feel out of reach at the moment, take comfort in this fact: Taking a critical look at your financial picture with an eye towards strengthening your cash position can ensure that you emerge from COVID-19 on a more sustainable and prosperous footing.

Susan Richards is the co-founder of numbercrunch, a one-stop-shop for business financial services. The company offers cloud-based bookkeeping, and virtual CFO and controller services. To learn more or to request a quote, visit numbercrunch.ca.