By now, your business has very likely been affected by the COVID-19 pandemic. You’ve got your team working from home, you’ve mastered Zoom conference calls, and have a productive home office space set up. You may have a clear idea of how your finances are affected at this point, but how do you manage cash flow in times like these?
Here are some key steps you should take to protect your business during this uncertain time.
Be ready to manage supply chain risk
If you haven’t already, review your supply chain and note where there is potential for high risk. Look closely at each link in the chain and prepare yourself for what may happen if one is broken after you’ve invested in that link. Is your supplier still in operation? What about their delivery service? Prepare yourself for the possibility of losing out on product (and the money invested in it) if your supplier has to close.
Revisit your variable costs
There’s a good chance that a few of your variable costs have already been reduced – you’re not taking those business trips and are restricting work-financed events. However, if labour is your biggest variable cost, it might be time to assess your team. It’s important to look at all the ways you can save cash before instituting layoffs, such as reducing work hours, moving contract work in-house, and encouraging your team to take their available leave are all avenues of reducing labour costs while minimizing layoffs. If you do have to make the hard choice of terminating employees, make sure you’re aware of any legal issues surrounding the situation – speak with a lawyer first. Provide the employee with their ROE and let them know what their funding options are from the Government, most will qualify for EI or the Emergency Response Benefit.
Expect a delay in receivables (and consider strategically extending your payables)
In times of financial crisis, it’s not uncommon for a business to choose to delay payment to their suppliers. Be prepared to make this decision for your company and have clients and customers make the same decision regarding your receivables. Create an action plan expecting slower payment of receivables so that when it happens to your company, it doesn’t take you by surprise. You might even consider proactively drawing up alternate payment plans and distributing them to your client to let them know that you understand their situation. This creates an extra level of trust and will likely secure their continued business when they are back on their feet.
Understand your business interruption insurance
Make an appointment to review your insurance coverage for times like this. Business interruption insurance covers significant business interruption, such as a large fire. However, after the SARS epidemic, some insurers included exclusions for losses due to epidemics and pandemics. Make sure you know if this is the case in your policy, and what your next steps are if you’re not covered.
Take advantage of alternate resources
This is the right time for you to apply for small business loans. Taking on a little extra debt to get you through a rough patch to a more profitable time is a wise business choice and a great way to manage your cash flow. As well, the Government of Canada is taking extra strides to ensure the nation’s small businesses survive during COVID-19. From flexibility for businesses filing their taxes to working with BDC to increase access to credit, they’re doing their part to keep you afloat. Here’s another great option: Facebook for Business is offering cash grants for up to 30,000 businesses in over 30 different countries.
This is a tough time for all business owners, know that you’re not alone. If you need help managing your cash flow, we’re here for you. Our team of professionals is monitoring the ongoing situation and keeping up to date on what COVID-19 means to SMEs. Schedule an appointment or give us a call at 647-476-2145 to talk to us.