Successful Cash Management During a Crisis (Part 2)

In Part 1 of this post we talked about how to survive this crisis by focusing on the 2 goals of successful cash management:

  1. Minimizing and/or delaying money going out of your business
  2. Maximizing and/or speeding up money coming into your business

You are in a time of crisis and your number one goal is to still be in business when the crisis is over.

Here’s a step-by-step guide to implementing a successful cash management plan in your business:

  1. Prioritize by Size- using the inflows and outflows from Part 1, identify those that will have the biggest impact of your cash flow and work on those first. For most businesses, that will be working with vendors and negotiating with their landlord.
  2. Eliminate the Non-Negotiables- don’t waste time trying to negotiate outflows that are non-negotiable. These are unique times and payments that may have previously been non-negotiable may be back on the table, but if you aren’t getting anywhere, move on. You can always come back, but right now moving quickly is important
  3. Analyze Late fees and Interest Charges- you don’t always have to pay every bill on time as it is due, but there will be consequences if you don’t. Understand what those consequences are. Cash is very valuable to your business right now so some late fees and interest charges may be worth paying late. You should analyze this trade-off carefully though, because those bills will have to be paid at some point. 
  4. Increase Access to Cash- look for ways to increase the cash that is available to you through credit cards, lines of credit, investors, and even friends and family. You don’t necessarily have to take any money right now, but knowing that it is there and available if you do is key for survival.
  5. Ask for Help- if you have a good accountant or financial advisor get them involved. They might see things that you don’t, and it will allow you to focus on operations knowing that you have help managing your finances.

Some of these measures may seem aggressive, but remember that you are in a time of crisis and your number one goal is to still be in business when the crisis is over. To do that you need cash. If you run out of cash your business closes, it is that simple. It is far better to have an aggressive cash management plan than to let the situation get worse, burn through your cash reserves, and leave yourself with little to no time to act.