Understanding the economic impacts on your business is critical. Our Business Services advisers have developed a seven step process to ensure the best prospects for managing your financials through this pandemic.
STEP 1 - Build a 12-month cash flow forecast - 3 months (weekly) and then 9 months (monthly) taking into account your COVID-19 circumstances. Include revenue impacts but retain committed expenses as-is for now - understand if you are cash flow positive. If not - understand your cash burn and your runway before existing reserves are exhausted.
STEP 2 - If you have a cash deficiency now or coming up, identify measures to reduce costs or increase revenue. Identify discretionary or non-business critical expenditure to eliminate. Identify overheads to defer, adjust or remove (e.g. rent, equipment leases, employee costs). Identify capital outflows to defer or adjust (e.g. dividends, bank loan repayments, capex).
STEP 3 - Engage with key creditors such as landlords, ATO and suppliers, explain your situation and attempt to negotiate stand-still arrangements where possible. An independent report from your accountant or financial adviser on your financial position will bring credibility and assist negotiations.
STEP 4 - Conduct due diligence on other capital sources, and engage with your existing financiers and consider equity sources - do existing shareholders have capacity? Are there logical buyers of your equity you can approach? Do you have assets that are non-core to realise in a short time to generate cash?
STEP 5 - Identify any local, state or federal government stimulus packages and support programs that are available. Identify how they impact your cash flow and apply where relevant.
STEP 6 - Develop a 90-day action plan incorporating the steps above. Include:
- Implementation of the cash flow measures identified (i.e. apply to financier for funds, negotiate with creditors for standstills, etc).
- Engagement with key stakeholders such as employees, financiers, landlords, customers and suppliers and remaining creditors to ensure they understand your position to continue business.
STEP 7 - Implement the plan and monitor regularly, updating your cash flow forecast in line with your 90-day plan.