Managing Cash Flow in COVID-19 Times

For most leaders today, cash flow is top-of-mind as organizations scramble to respond and remain proactive to COVID-19’s economic impacts. With everyone working off their stability plans, simultaneously launching recovery plans, they’re scrutinizing cash flow like never before. Why? Cash is king. At MAP, we call it a “Vital Factor,” a key driver to every organization’s success. Without razor-sharp focus on this Vital Factor, cash-flow oversights and mistakes can undermine even the most fiscally responsible leaders and organizations.

Need immediate structure around managing your cash flow? Try these strategic steps:

Step 1. Scrutinize your cash-conversion cycle. Become the expert in knowing how fast you’re getting cash, billing clients/customers, getting paid, and paying your people and vendors. To get that information, drill down on your accounts receivable aging, accounts payable aging, billing time, cash on hand, cash flow, inventory and other financial factors—including any incoming or future Paycheck Protection Program (PPP) resources—specific to both your organization and your industry.

Step 2. Create daily discipline around your financial dashboard. Establish which aspects of your cash flow are most critical and put them on a dashboard. Review that dashboard daily, paying close attention metrics and the activities tied to successes and/or shortcomings.

Step 3. Set your cashflow triggers. What happens when you reach certain financial thresholds? Do you cut back on certain expenses or choose another course? Establish at which point triggers must be set, plus the actions tied to those triggers, keeping in mind triggers apply to hitting both positive and negative thresholds. (For more on “trigger points,” read this article by MAP Senior Consultant Lee Froschheiser.)

Step 4. Create cash-flow accountability. Assign the right people to “own” your vital cashflow factors. These individuals must understand the job expectations, have the resources to succeed, and be held accountable to daily performance and results. For example, if you’ve applied for PPP assistance—this is vital to your cashflow dashboard! Make sure the person managing this resource has a grasp of the program’s rules and the necessary supports to comply. Then, require this lead to report compliance metrics regularly so to avoid surprises or, worse, losing PPP forgiveness opportunities.

Step 5. Get creative about boosting cash flow on a budget. With your team, brainstorm options, such as:

·       short-term discounts from your vendors or price-shopping comparable vendors

·       expenses you can pause

·       customer incentives to pay early, faster or easier (e.g., ETF or wire vs. check)

·       the worth of short- and long-term investments

·       more marketing efforts with strong ROI—and in desirable areas where competitors may have pulled back

·       low-interest SBA loans, community grants and other financial assistance programs

Leave a comment below to share how you’re boosting cash flow on a budget.

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