As many have feared, the coronavirus (COVID-19) has now arrived in the United States with a vengeance. As business owners, we are stronger than this virus, but all these circumstances and yet the unforeseen future consequences beg the question: is the company that you run or own prepared for a sudden catastrophe?
As a B2B CFO® working with privately-held businesses, we see that many business owners are starting to feel the economic impacts of the coronavirus, both indirectly and directly. Here are 5 steps we recommend to take to help to protect your business and your employees.
Protect You Liquidity – Hold on to Cash
If your business is forced to shutdown, do you have enough cash flow to keep you afloat? Cash is king and you need to have cash on hand to survive an economic shortfall. Consider the following ways to protect your cash flow:
– Shorten collection times and accelerate accounts receivable. Your cash reserves can dwindle if customers regularly pay late. Customers should be invoiced daily, immediately after services are performed or products have been shipped. Reach out to those late-pay clients and encourage them to be current on their invoices.
– Effectively manage accounts payable. Don’t rush to pay bills early unless you are taking advantage of favorable terms (i.e., 2%/10 Net 30). Businesses that properly manage payables will avoid incurring late fees and interest charges. Consider negotiating extended terms with your vendors when possible. By negotiating with vendors and suppliers, many are willing to extend payment terms with businesses they view as long-term customers. By extending your payables and accelerating receivables, you can improve cash flow quickly.
-Develop purchasing policies to keep inventory levels at a minimum. A business’ cash flow cycle is greatly affected by its inventory purchases. Businesses need to spend cash to buy inventory, which turns back into cash when it sells. Your cash flow is easily reduced by poor inventory management. Determine the most efficient inventory levels, which can significantly improve your overall cash flow.
Constant Communication & Business Continuity Planning
To protect your employees and their families it’s important that you communicate regularly with your staff, letting them know this is a fluid situation so be alert to further communication. Share the latest information about the virus, and your company’s procedures. Encourage your staff to stay home if feeling ill, ensure constant environmental cleaning procedures, and follow the CDC guidelines related to the coronavirus. HERE-> If your staff can work from home, establish a remote workforce task to keep business moving forward.
For your team to devise Disaster Recovery & Business Continuity Planning, please read this article–> by B2B CFO®
Restructure Your Debt
The loan repayments you’re currently making may have interest rates that are placing a financial strain on your business. Consolidating your company’s existing debts could mean that you pay a lower interest rate overall, reducing the cost of finance to your business from outstanding loans.
One B2B CFO® client was able to keep an extra $30,000 on hand per month by working with their lender to restructure debt. Some steps include extend the maturity date, modify financial covenants, defer principal payments for a period of time and even a reduction of your loan interest rate are all ways your bank can work with you to help restructure debt to keep your cash flow at levels higher.
Small businesses affected by the coronavirus are now being granted access to low-interest loans from the Small Business Administration (SBA).
- Trump Administration announced a major infusion to small business lending as part of a broader coronavirus response.
- The low-interest loans from the Small Business Administration will be made “effective immediately” in states and cities affected by COVID-19.
- Trump also asked Congress to bolster current funding levels for the SBA lending program to $50 billion.
Create Multiple Banking Relationships
B2B CFO® always recommends you establish a banking relationship before you need cash—not when you need it. But, there is still an opportunity to work with your local financial institution and leverage a relationship when threats confront your business. The relationship you develop with your business banker should go far beyond a loan and a checking account. An established banking relationship should be able to provide solutions to help your business obtain financing, enhance cash flow and stay secure. Seek a banker who is a committed advocate for your business even when times turn tough.
Work with a CFO
CFOs will use their deep understanding of financials and liquidity to understand how volatile prices and demand will affect the performance of the companies. As the coronavirus impacts your business and the world, now is the time to seek expert guidance from a trusted business advisor with strong banking relationships and financial expertise to help your business weather this potential economic storm.
B2B CFO® has the experience to work with you to help build and maintain a business contingency plan to keep you, your employees and your business safe. Please contact us to discuss your particular circumstances and help ensure that your business survives the unexpected.