Strategies to Manage Cashflow During the COVID-19 Crisis Presented - - PowerPoint PPT Presentation

Presented by: Date: Presented by: Troy Laursen and Jory Soubiran April 20, 2020

Strategies to Manage Cashflow During the COVID-19 Crisis

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Agenda

• Assess Current and Future State
• Sales Impact
• Operations
• Cash Flow
• Human Resources

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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

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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

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Sales

• Communication with Customers is Key
• Current contract impacts
• Force Majeure?
• Schedule impact?
• Terminations?

Likely expect some renegotiation from customers

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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

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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

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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

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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

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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.

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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.

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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
• utgoing cash.

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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

Prepare a Cashflow Forecast

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Prepare a Cashflow Forecast

• 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.

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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.

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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
• perating in a digital world may be changing their preferences.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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Troy Laursen Senior Manager, Consulting Troy.Laursen@mnp.ca (587) 441-6034

This situation is dynamic and government programs can change. To stay up to date and receive insights from our team, visit our

COVID-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 Soubiran Senior Manager, Consulting Jory.Soubiran@mnp.ca (587) 438-4465