strategies to manage cashflow during the covid-19 crisis · monitor cashflow daily and weekly •...

Presented by:

Date:

Presented by: Troy Laursen and Jory Soubiran

April 20, 2020

Strategies to Manage Cashflow During the COVID-19 Crisis

Agenda

• Assess Current and Future State

• Sales Impact

• Operations

• Cash Flow

• Human Resources

Assess Current State

• What is impacting my business

• What are the specific impacts• Regulations, crew sizes, hours, other

• Shifting demand (Deferred/Cancelled/Accelerated)

• Resource availability

• Assess the severity of the impacts

Like a knocking in your cars engine

Understanding the problem is the first step

Assess Future State

• How long could it last

• Create a matrix

• Duration and severity

• Low/mid/high case

• Break it into Sales, Operations, Cash Flow & HR

Keep it Simple – No need for glossy

The key is to have thought about it

Sales

• Communication with Customers is Key

• Current contract impacts

• Force Majeure?

• Schedule impact?

• Terminations?

Likely expect some renegotiation from customers

What is in the Sales Pipeline

• Create a matrix of current sales cycle• Sold – no change

• Sold - tentative

• Not sold

• Business Development

• Assess your counterparties• Creditworthiness

• Outstanding A/R

Understand your sales cycle

Resource accordingly

Operational Impacts

• Can you still execute the work• Crew impacts

• Are there additional protocols

• Are there Supply Chain constraints

• Do you need additional security

• Manage your inventory• Replenish based on current projects, not future ones

• Adjust re-order points and quantities

• Explore VMI, Consignment, Competitors

KISS – Keep It Super Simple

Information Technology

• Tools assessment• Do you have the right tools in place

• Does your software support remote work (ex. Quickbooks)

• Who needs access• Do required staff have the necessary access

• Printing, scanning and signatures

Opportunity to reconcile software licenses

Cell phones and IT providers

Potential Scenarios

• Operational Reduction

• Identify key staff and key suppliers

• Communication is paramount

• Identify critical operational systems and processes

• Complete Shutdown

• What systems and processes must keep running

• What does a “black start” look like

Develop responses for

Low/Mid/High scenarios

Understand the Situation

• Demand for your products or services hasn’t ceased; it has shifted.

• Customers are delaying purchases of certain goods and services in favour of others that are more urgent right now.

• This shift will impact your cashflow.

Understand the Impact

• Goal is to predict and prepare for potential upcoming cash shortages.

• Two current priorities:

– Cash and Liquidity Management

– Cost Management

Cash flow is like oxygen.It’s what keeps your business alive.

Prepare a Cashflow Forecast

• The timing of when cash comes into and goes out of your business is what’s important.

• Prepare a cashflow forecast for at least the next three to eight months.

• Start by creating a list of all of your incoming and outgoing cash.

INCOMING CASH

• Anticipated sales

• Investor contributions

• New loans

• Refunds

• Any other kind of income

• Business support programs

OUTGOING CASH:

• Wages

• Payments to suppliers

• Rent

• Other expenses

• Taxes

• Loan payments

• Capital asset purchases

• Owner withdrawals



• Develop various scenarios to inform your business decisions:

• Best Case

• Worst Case

• Most Likely

MNP will provide a 13-week cashflow forecast template to use as a guide.

Monitor Cashflow Daily and Weekly

• Update your cashflow forecast at least weekly—if not daily.

• Conduct daily bank reconciliations and cash checks between ownership and finance.

• A clear view of your cash activity will help to:

• Make timely changes to keep the business viable.

• Mitigate potential for unauthorized / fraudulent payments and surprises in your cash position.

Secure Your Key Customers

• Contact your most critical customers to find out how their needs may have shifted.

• Consider the need / opportunity to adjust your sales channels.

• EXAMPLE: some customers who were historically uncomfortable operating in a digital world may be changing their preferences.

Maximize Your Available Cash

• Consider drawing the full amount from your lines of credit to maximize your cash cushions.

• Consider asking for an extension of your line of credit.

• Start talking to your shareholders / investors about the potential need to raise additional equity over the next 90-120 days.

Extend Your Debt Payments

• Ask your lenders to:

• Defer principal payments

• Wave covenant tests for 2-3 quarters

• Wave excess cash sweeps

• Consider asking your lender for some or all of these, regardless of if you think you will need it.

Secure Your Supply Chain

• Priority is to keep the business running.

• Communicate with key suppliers to ensure they can continue to meet your needs.

• If needed, create specific procedures to engage and retain your strategic suppliers.

Extend Your Payables

• Contact vendors / landlords about the potential to defer or extend payments:

• Some may be willing to extend flexible terms.

• Even if you hear "no“ the first time, keep asking.

Conversely, be prepared to be on the receiving end of this conversation.

Negotiate With Vendors and Suppliers

• Reassess costs and renegotiate prices with vendors and service providers.

• Request flexible or extended payments.

• Prioritize your most important suppliers / vendors when timing payments.

In the current environment, everything is renegotiable.

Prioritize Your Payments

• Your priority is to keep the business operating:• Wages

• Key Suppliers

• Insurance / Bonding

• Business debts you have guaranteed personally.

• Canada Revenue Agency (CRA)• Federal income tax payment deferred until after August 31.

• GST/HST payments owed deferred to June 30.

Accelerate Your Receivables

• Send invoices quickly (electronically) and frequently to speed up cash collections.

• Consider asking new customers for a deposit or partial payment upfront.

• Send reminders to collect past due accounts.

• Make it as easy as possible for clients to pay.

This will likely difficult given many customers will be trying to extend payables, but still worth a try.

Freeze Non-Essential Spending

• Do this immediately.

• Review your overall spending:

• Prioritize expenses that keep you operational and generate revenue.

• Bias toward halting spending completely or reducing spending for several months.

• Identify what can be cut immediately versus cut later if the

current state persists.

Develop a Human Resource Plan

• Policies and procedures

• Communication plan

• Review your entire staff list and prioritize which employees to:

• Retain

• Lay off temporarily

• Terminate

• Utilization and workflow capacity planning

• Prepare to make hard decisions. Fast.

Consider potential federal and provincial programs available to support employees and your business.

Troy LaursenSenior Manager, [email protected](587) 441-6034

This situation is dynamic and government programs can change. To stay up to date and receive insights from our team, visit ourCOVID-19 Business Advice Centre at MNP.ca/COVID-19. We’re dedicated to supporting Canada’s business leaders by providing timely information and practical solutions for navigating through the uncertainty of COVID-19.

Jory SoubiranSenior Manager, [email protected](587) 438-4465

https://www.mnp.ca/en/covid-19

strategies to manage cashflow during the covid-19 crisis · monitor cashflow daily and weekly •...

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