CASH MANAGEMENT DURING COVID-19

COVID-19 has put us all on survival mode. For most businesses, it’s been a whole month of not much activity which means less income. The government and private sector have introduced various debt relief measures, but cash flow management during this time can still be tricky.

As month-end approaches, the struggle to balance money coming in (debtors) and money going out (creditors) will be a reality. Ideally, as a business, you should be striving for a positive cash position which means more money into the business than the money being paid out.

So how do you manage your cash flow during this difficult time?

1. Prepare your cash flow forecast

Your reality has changed so old forecasts are no longer relevant. You need to adjust your financial plan accordingly. You need to know exactly how much you will have at the end of the month, considering whatever measures you have put in place. This is particularly important for businesses that are taking advantage of payment holidays from banks and other creditors. You need to accurately project when these deferred payments will fall due in the year. Make sure that you review your projections regularly and adjust for your reactive plans.

2. Cash in the bank

If you do not have cash in the bank, speak to your bank to see if you qualify for an overdraft facility or business loan. If you have work that you have completed, make sure that you have issued invoices. Pick up the phone and follow up on all outstanding payments. This is no time to be lenient towards your debtors. We are all facing a crisis.

3. Cancel your direct debit orders

Careful here, but if you have debit orders that are for utilities on an office that you are not using then you need to consider stopping those. Subscriptions to tools and resources you are not using at this point can wait. You need to prioritise payments and make sure that your priorities are fair to your suppliers and employees.

4. Manage your tax payments

SARS has provided some relief in the form of deferred payments on PAYE (visit SARS here to see these measures). Take advantage of this. Make sure to update your projections accordingly. Ask your accountant to assist you in this regard.

5. Turn your current orders into cash

Negotiate with your customers to pay you upfront, whether in full or partially. You have costs to keep and it is reasonable to make this request to your customers. Also be realistic about your current order book, clearly identify work that can still be fulfilled from that which is unlikely to be fulfilled.

6. Keep your staff on payroll

When this crisis finally ends, you will need your staff to re-build and start growing again. The future of your business is dependent on the loyalty and morale of your staff. So try by all means to keep your team intact. Take advantage of UIF and other relief measures in place available here.

7. Communicate communicate communicate

Stay close to your customers, your suppliers, and your staff. Negotiate with suppliers to ease your burden. Request flexible payment terms have a plan, don’t just ask for a payment holiday since they are also feeling the pinch as much as you are. If you are not going to meet your obligations, it is your responsibility to communicate this effectively and as early as possible.

Finally don’t lose sight of the fact that this crisis will come to an end at some point. If you are able to survive during this time, it is likely that you will be able to increase your revenues from an increased market share as not all businesses will survive. Focus on managing your cash flow and you will weather the current storm.

If you would like to discuss any of the above and how we can assist your business, please contact us here.