Managing your cash flow during COVID-19
The COVID-19 pandemic has created unparalleled disruption to lives and businesses around the world. The non-stop news cycle is overwhelming, and it is daunting to keep up with the daily updates and announcements from federal, provincial and local governments.
Fuller Landau is here to help.
As a business owner, your immediate concerns are for your employees’ safety and to ensure that your cash flow situation is sound. Where should you start? We outline below some questions to consider.
The Government of Canada continues to release more information about relief programs for businesses and individuals as part of the COVID-19 Economic Response Plan. The team at Fuller Landau has created a COVID-19 Resources hub to provide you with the latest updates and information on the government’s programs to support businesses that are hardest hit by the COVID-19 pandemic.
Managing and assessing cash flow is an ongoing exercise that must be monitored on a regular basis. It becomes particularly important to do so during challenging times. Forecasting and re-forecasting is critical, now more than ever. Be prepared to expect that forecasts will need to be updated frequently as the situation surrounding COVID-19 evolves.
It’s important to review all aspects of your business, including examining policies and processes followed and assessing whether changes may be required during these turbulent times.
Cash inflow – what are your sources of cash and when do you expect payment?
Your customers
| Questions | Factors to consider |
|---|---|
| How likely are your customers to pay you in accordance with credit terms? |
|
| What are the difficulties your customers are facing that may delay payments to you? Will their business be viable as a going-concern? |
|
| If you’re not able to collect from your customers, how will this impact your business? |
|
Cash outflow – what cash obligations do you have and when do you need to make payments?
Your vendors
| Questions | Factors to consider |
|---|---|
| When are payments to vendors due? How far can you stretch the terms without comprising supplier relationships? |
|
Other liabilities
| Questions | Factors to consider |
|---|---|
| Do you have existing debt obligations? Are you able to meet your monthly principal and interest payments? |
|
| How about payroll – do you have enough cash to cover your payroll? |
|
Fixed and variable costs of your business
Fixed costs are more difficult to manage as they include rent, insurance, etc. Revisit any variable costs that could be streamlined to manage cash flow. Review your discretionary spending – how necessary are these costs to the viability of your business? Are there opportunities to achieve the same results in other ways?
Your financial or business advisor understands your business operations and will help you navigate your cash management processes during these uncertain times.
Talking with your banker
It’s important to engage in conversation with your banker to keep them abreast of your company’s operational results and plans. Having open lines of communication and transparency in financial reporting goes a long way. It helps build trust and gives you both an opportunity to find a solution together. For example, it might lead to waiving certain bank covenants for a specified period of time or increasing your operating credit line to assist with short-term cash requirements.
The team at Fuller Landau is ready to assist you and your business.
COVID-19 FINANCIAL RELIEF PROGRAMS[ps2id id=’covid-19-financial-relief-programs’ target=”/] Please visit these sites for more information on their financial relief programs.
Business Development Bank
https://www.bdc.ca/en/pages/special-support.aspx
Economic Development Canada
https://www.edc.ca/en/campaign/coronavirus-covid-19.html
Note: this link includes a list of financial institutions that are approved to administer COVID-19 relief efforts.
Ontario Ministry of Finance
https://www.fin.gov.on.ca/en/tax/eht/
About the Authors
Rosanna Lamanna, CPA, CA is a Partner in our Audit and Accounting team. She can be reached at 416-645-6502 or rlamanna@fullerllp.com.
David Filice CPA, CA, CIRP, LIT, is a Partner in our Restructuring and Insolvency group. David can be reached at 416-645-6506 or dfilice@fullerllp.com.