Successful Food Business Cash Management During a Crisis (Part 1)

Cash is the only thing that matters in surviving a crisis. Of course we want to maintain our staffs and continue to delight our customers, but without enough cash to get through the crisis none of that other stuff matters. Cash is the only thing that matters in surviving a crisis. Have I convinced you yet? Good. Now let’s talk about how to manage cash so that you survive the Coronavirus crisis. 

Cash is the only thing that matters in surviving a crisis.

There are only 2 things that you need to focus on right now:

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

Simply put: you need enough cash in your business to stay afloat until things are somewhat back to normal. To protect your cash, you need more coming in and sooner and less going out and later.

So now let’s look at all the ways you can improve your cash management starting with the money coming in:

  1. Revenue- this is the most obvious; you need more money from customers. What is not so obvious is what you will sell in order to collect that money. Previously most of your revenue came from your core business, but now that may not be an option. Time to get creative! Look for other ways to service customer’s needs: take-out, delivery, and family style meals are a few options but not the only ways. Could you work with other local businesses to wholesale products? Have you asked your customers what they would like to see from you? What solutions are you and your family looking for? Get creative, any way that you can increase the amount coming in is a win right now.
  2. Accounts Receivable- many food businesses do not have people who owe them money since customers pay when they eat, but if you do retail or wholesale you might have outstanding balances due from customers. If you do, collect! Start with the overdue accounts, and then reach out to those that are still current to see if your customers can pay early. Offering a small discount for early payment might help.

Now let’s look at how you can decrease or delay the amount of money going out:

  1. Accounts Payable- take a look at all the outstanding invoices you have and start reaching out to the vendors to see if you can get an extension. Being proactive and reaching out is far better than just not paying or paying late with no warning. They may be willing to grant you an extension or at least waive late fees. If they aren’t willing to work with you, then consider what the late charges will be; is it worth keeping the cash on hand and paying the late fees? Act with caution here, and make sure you understand all the implications of an unpaid bill. 
  2. Inventory- any inventory that you carry is money on the shelf. If you can carry less inventory during the crisis, that is more cash in your business. Can you use some of the product that you have to add specials instead of ordering new product? Can you limit the number of items you offer so that you can carry less SKUs? Any ways that you can decrease the amount of items on your shelves is a win for cash management.
  3. Recurring Monthly Payments- look at your spending for the last few months and identify all of the recurring monthly charges that you have. You may be surprised! If any of the charges aren’t essential, cancel them immediately. You could even reach out about a refund if you haven't been using the product. Bonus tip: do this for your personal expenses too. 
  4. Debt Payments- if you have loans for the company, reach out to the lenders. Considering how far-reaching this crisis has become, they may be willing to work with you to come up with a different payment plan or to defer payments. 
  5. Rent- this is one of the biggest expenses for most food businesses and therefore one of the first you should address during this crisis. Reach out to your landlord immediately. Even if you aren’t ready to negotiate, the more of a heads up you can give them that you are going to be requesting either a rent adjustment or deferment of payment, the better. Get the conversation started before you are late on a payment. Then check out our guide to Negotiating With Your Landlord During a Crisis.
  6. Owner’s Draw- Yes, we have to talk about this one. The less money that you as an owner can take out of your business right now, the better. Take time to look over your personal finances and determine what the minimum amount that you need to live off of is. Now is a time to dig into your savings if you can, or to put expenses on your credit card. This shouldn’t be done carelessly, you do need to consider what will happen to your personal finances if your business fails to make it through this crisis. If you have a financial advisor this is a great time to get them involved. 
  7. Payroll- paying your employees is on this list only so that I can explicitly say it is a non-negotiable expense. If you have staff working, you need to be sure you can pay them. If you aren’t sure you can pay them, then decrease your staff or negotiate pay cuts with the staff you do have, but do this before they work their shifts not when payday comes and you can’t clear the checks. That’s a big no-no. 

Not every business will have or will be able to adjust each of these line items, but start looking at the cash coming in and out of your business and pinpoint a few ways that you can manage your cash with the 2 goals of successful food business cash management in mind: 

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

If you understand your cash flow and are ready to take the next step, check out Part 2 of this post.