Skip to content

Insights

Back to All Articles

Cash is King: Managing cash flow during the COVID-19 Crisis

Saturday April 11, 2020

The COVID-19 pandemic has had serious cash flow implications for most businesses. In order to quickly and effectively respond to the financial challenges delivered by the current crisis, business owners need to think and act like a CFO. As leader, your capacity to maximize cash flow will play a key role in your ability to successfully pilot your organization through the challenging weeks and months ahead.

Here are 15 ideas to maximize cash flow during the COVID-19 pandemic:

  1. Stop all non-essential spending. This includes deferring or canceling any capital expenditures.
  2. Restructure your employee compensation plans. There are several options available, including government wage subsidies, EI work sharing plans, and reducing wages by an agreed upon rate across the board. If temporary layoffs or terminations are necessary, consider a supplemental EI top-up plan. CERB payments are also available to laid off or terminated employees who are ineligible for EI. No business leader enjoys making the decision to terminate an employee, but the viability of your business is paramount right now.
  3. Renegotiate rent with your landlord. Ask if a free-rent period is possible. If not, can you defer and pay the rent over an extended period of time?
  4. Defer HST and income tax payments. The government has granted a deferral on certain HST payments until June 30th and a deferral on corporate tax payments, due after March 18th, until September 1st.
  5. Skip mortgage payments if possible or restructure your business loans and mortgages to increase their term and/or amortization periods.
  6. Track your cash flow daily and ensure that you understand your global borrowing limits.
  7. Rerun your cash flow forecasts from a pessimistic view, imagining all the possible ‘what ifs’. This way, hopefully all surprises will be positive ones and you can sleep better at night.
  8. Have an independent person review your cash flow forecast. What does break-even look like? Have a 13-week forecast, a six-month forecast and a one-year forecast.
  9. Review your accounts receivable list weekly and continue your collection activities. There may be some reluctance by team members to send statements of account and make collection calls during this time, but remind them how important cash receipts play in supporting the company, especially now.
  10. Consider government measures like the Temporary Wage Subsidy (the 10% plan), the Canada Emergency Wage Subsidy (the 75% plan), and the Canada Emergency Benefit Account (the $40,000 small business loan plan) and apply for every program and opportunity applicable to you.
  11. Stay in close touch with your banker/financial institution and ask for a 10% increase in your current borrowing limit.
  12. Make sure your books and records stay up-to-date and that you know your numbers, as the current government programs require monthly financial reporting. Our most successful clients know their numbers in both good times and bad.
  13. Consider drawing down open lines of credit to secure cash reserves.
  14. Watch your balance sheet for surprises around uncollectible accounts, obsolete or slow-moving inventory, or accelerated liabilities (i.e. demand loans).
  15. Although it won’t help maximize your cash flow in the short or even mid-term, it is important to remember to support the small guy. Ensuring that you pay your small suppliers now will help propel the economy forward when we get to the other side of the current crisis.

Hope is not a strategy and unfortunately, the goal posts will continue to move on you. The best way to lead your business successfully right now is to move quickly, yet thoughtfully. Be bold in your actions but ensure that you have a back-up plan. Remember: cash is king, everything is negotiable, and “he who holds the gold makes the rules.”

 S+C Partners is OPEN FOR BUSINESS

S+C Partners is committed to helping our clients, our staff, and our community during this difficult time and our team is ready to assist you with navigating the challenges posed by this crisis.

Please call us at 905-821-9215 or email us at tax@scpllp.com with any questions.

CATEGORIES:

Uncategorized