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

Strategies to Manage Cashflow During the COVID-19 Crisis Presented by: Presented by: Troy Laursen and Jory Soubiran Date: April 20, 2020

Agenda • Assess Current and Future State • Sales Impact • Operations • Cash Flow • Human Resources Page 2

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 Page 3

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 Page 4

Sales • Communication with Customers is Key • Current contract impacts • Force Majeure? • Schedule impact? • Terminations? Likely expect some renegotiation from customers Page 5

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 Page 6

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 Page 7

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 Page 8

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 Page 9

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. Page 10

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. Page 11

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. Page 12

Prepare a Cashflow Forecast I NCOMING C ASH O UTGOING C ASH : • Anticipated sales • Wages • Investor contributions • Payments to suppliers • New loans • Rent • Refunds • Other expenses • Any other kind of income • Taxes • Business support • Loan payments programs • Capital asset purchases • Owner withdrawals Page 13

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. Page 14

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. Page 15

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. Page 16

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. Page 17

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. Page 18

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. Page 19

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. Page 20

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. Page 21

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. Page 22

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. Page 23

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 . Page 24

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. Page 25

Troy Laursen Jory Soubiran Senior Manager, Consulting Senior Manager, Consulting Troy.Laursen@mnp.ca Jory.Soubiran@mnp.ca (587) 441-6034 (587) 438-4465 T his 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. Page 26