No matter how thorough your contingency plans are, they likely did not include some of the things currently coming your way or decisions you have to make in light of the situation with coronavirus.
The challenges businesses are currently facing generally lead to a need for short-term liquidity. Whether you’ve had to temporarily shut down production, let employees go, move to a less productive work environment, or had to reduce operations, you are likely seeing a revenue decline. It may not last long, but you need to have a plan to get through the next few weeks or months. Below are 4 ideas that may help you keep things going until your operations are back to business as usual.
- Proactively reach out to your banker or other creditors. Often the reaction is to hide from your banker during turbulent times, but it’s better to open the lines of communication if you have any inklings that you may encounter challenges keeping up with loan or credit payments. By initiating a dialog in advance and preparing your banker for what’s to come, you’ll develop a stronger working relationship. You may even find that they are willing to do more to support your organization than you imagined.
- Don’t be afraid to ask. The Federal Reserve recently lowered interest rates to support businesses and individuals as they work through the current situation. Ask creditors for a change in terms on outstanding debt. Practically overnight, times have changed and your financiers may be willing to revisit your contractual agreements to reduce rates or change repayment terms. If you don’t already live by the ‘the answer is always no if you don’t ask’ philosophy, the time is now.
- Evaluate Variable Costs. While leadership may be hesitant to implement some of these tactics out of concern over creating additional anxiety within the company, it is important to evaluate non-essential or delayable expenses and expense reduction strategies early. Instituting hiring freezes, halts on discretionary spending, and even voluntary leave policies are all options to consider. Moving from fixed to variable cost structures through contractors, leasing, etc. are also ways to increase agility in your business and help navigate the uncertainty ahead. Engage with all departments to ensure they understand the priority and become part of the solution.
- Watch Your Receivables. Negotiating payment terms with vendors is both a strategy for improving your short-term cashflow, as well as a risk when your customers do the same. Monitor your receivables closely and plan ahead for those that may be slow-pay, or worse yet no-pay if they are not prepared to weather the situation.
Before you determine your approach, you should update or prepare your budget and financial projections. It’s important to have a comprehensive view of your financial situation. The information will put your business in a better position to negotiate, plus you don’t want to risk implementing unnecessary cost saving tactics that you don’t need. Also, bankers and other business partners will want the reassurance of knowing that your business is positioned to return to business as usual after the dust settles. If you need assistance compiling or refining your projections, we are here to help.
