Economic downturns can create a crisis for many businesses, threatening cash reserves and even survival. Below are a few suggestions for managing cash and reducing the burn.
1. Get your arms around your cash position – fast. Make a list of all incoming cash (revenues) and outgoing cash (salaries and expenses). Starting with your current cash balance, forecast the next three to six months. This will give you an indication of what it will take to survive.
2. Minimize your outgoing cash by cutting anything that you can live without.
3. Make sure you know what cash you have coming in and when it is due, then collect it. Call the day it is due and ask when you should expect it. It is your money; ask for it.
4. Forecast your weekly cash flow with what you learned in the first three steps. The most important assumption will probably be how long your revenues will be lower, or even zero. The other key assumption will be how fast things will normalize. Run a few scenarios: best, worst and most likely.
5. Think hard about your revenues. Is there a pivot that you can make to create new revenues? Will lower prices temporarily bridge the gap?
6. Now you know about how much cash you need to survive. Go find it. Start with your largest non-people expenses, like rent. Negotiate. Remember, it will ultimately cost your landlord money if you leave. They will more than likely have vacancy expense while a new tenant is secured. So don’t be afraid to discuss options with your major vendors.
7. That includes your bank. If you have debt, loans or credit cards, talk to your banker. Some banks are offering payment deferrals. Know what is available.
8. With regard to people, deal with any performance problems you were ignoring first. It sounds harsh but you won’t survive without tough decisions. Consider asking everyone to share in salary reductions instead of eliminating jobs, especially if this means you can maintain health insurance. Do what you need to do with compassion.
9. Learn everything that you can about the applicable government programs and use them.
10. If your business is a great one then your cash issue is totally situational. Evaluate your options for new debt or equity carefully. Make sure that your business can cover any new debt expense when things normalize.
