What makes this time especially difficult is that not only are many businesses suffering a cash crisis, but so are their clients, vendors, and lessors. Many businesses seeing decreased cash flowing into their business, but they’re also likely receiving increasing pressure from lenders or accounts payable to pay up.
For many businesses, a beacon of hope was the opportunity for stimulus funding. However, if you didn’t receive the funding you were expecting, what are your options for extending the life of your business to survive this crisis?
7 Strategies for Surviving the COVID-19 Cash Crisis Without Stimulus Funding
While the government continues to pass unprecedented stimulus funding in the throughs of the COVID-19 financial crisis, many businesses are still left without a safety net. In this article, we take strategies derived from financial experts to “extend your runway” to improve your probability of survival and recovery.
1. Create a 3-Month Rolling Cash Forecast
One of the first, most important places to start in addressing the financial crisis is to know the state of your finances now and how much runway you have left. Regardless of which of the strategies you use below to save your business during the financial crisis, you can’t do any of them—or do any of them well—without a 3-month rolling financial forecast.
If you do not currently have a rolling financial forecast (or have one but haven’t updated it in a while), now’s the time to sit down and plan. Your forecast should not only include your current expected case projections but should include a best-case and worst-case view as well.
2. Cut Wherever Necessary
We weren’t going to include this one because it is obvious, but we’ve been receiving a lot of questions about cash flow, so we decided to include it.
Using your financial forecast, find cuts you can make to decrease cash flowing out of your company. It’s important to make these cuts as fast as possible to prevent loss. However, don’t make these cuts blindly. You don’t want to cut so deep that you debilitate your ability to recover and grow when the time comes.
It’s likely you’ve already made cash cuts in your business during the COVID-19 crisis. However, do you know exactly how much runway that gave your business? If not, apply these cuts to your 3-month rolling forecast and apply best case, worst case, and expected case scenarios to your projections. If the runway still looks bleak, it’s time to make more cuts. Your goal is to survive long enough for something good to happen.
3. Analyze Your Lines of Credit
Even though you may not have received stimulus funding, there are other financing opportunities available. Take a look at your existing lines of credit or where these lines of credit may become available.
This financial strategy is more difficult during a crisis than it is before a crisis, but a crisis does lead to an important learning lesson. You should be maximizing your lines of credit during the good times to have a more stable backup plan during the bad times.
4. Have a Relationship With Your Bank
Unfortunately, many businesses lost out on stimulus funding simply because they didn’t have a good priority with their bank. They may not have learned of the stimulus options fast enough, did not know where to turn, did not receive enough support in filling out the necessary applications, or simply weren’t prioritized. For any business of any size, the relationship you have with your banker is essential.
It’s not too late to jumpstart this relationship. Reach out to your bank—and don’t only reach out once. Begin developing that relationship so that when another opportunity becomes available, you’ll have a better chance of receiving the support you need to take advantage of it.
5. Reach out to Lenders
Another place to look is your accounts payable. There are a couple of things to consider here:
First, reach out to your lenders. In many cases, your lender or landlord may be willing to work with you to extend deadlines or even negotiate better terms. Reach out to each and every company to which you owe money and try to work with them. Most lenders know that their best chance of receiving money is to help you stay in business long enough that you can pay it.
Second, know your timelines. Don’t try to pay everything faster than you need to. Cash in your pocket is cash you can use to extend the life of your business or even take advantage of growth opportunities during this time. In many cases, your best bet is to pay the minimum payment terms when your payment is due rather than paying early—this is especially true if you’ve negotiated better terms with your lender.
6. Take Initiative with Accounts Receivable
Just as your lenders are more likely to negotiate better terms with you during the cash crisis, you can also do the same with your accounts receivable—after all, some money coming in is better than no money coming in. Consider loosening payment terms or offering early pay discounts.
This step should be taken cautiously. You should always have a good grasp of your clients’ current ability to pay. Know whether they’re capable of paying and when to expect payment. Don’t make sweeping offers to those on your accounts receivable list; instead, make personalized exceptions and opportunities based on what increases the likelihood of you getting paid.
7. Talk to an Expert
If you don’t have a high-level financial expert in your company, now is the right time to meet with one. Many strategic outsourced CFO firms are offering free financial consultations at this time. You can usually talk through your financial challenges or even give the expert access to view your financials to provide personalized advice for extending your runway and recovering from the crisis.
About the Author
Jerry Vance
Jerry Vance is the founder and managing partner of Preferred CFO. With over 15 years of experience providing CFO consulting services to over 300 organizations, and 28 years in the financial industry, Jerry is one of the most experienced outsourced CFOs in the United States.
You may also be interested in…
From Burn Rate to Boom: How to Stretch Every Dollar in a Startup
Running a startup comes with the high-stakes challenge of managing your burn rate—the pace at which your company spends cash. Each dollar isn’t just an expense; it’s an investment in your company’s future. With venture capital not always guaranteed and economic...
The Art of Letting Go: A Guide to Selling a Business
Selling a business can be one of the most transformative and emotionally charged decisions an entrepreneur will ever make. Whether you’ve been building it for years or inherited it from family, your business likely holds significant personal value. Deciding to let go...
The Outsourced Controller: A Secret Weapon for Financial Stability
As unsung heroes of financial management, outsourced controllers can bring significant benefits that go well beyond basic bookkeeping.
Beyond the Numbers: Uncovering Hidden Insights in Internal Audits
When it comes to internal financial audits, numbers often take center stage. Financial ratios, variances, and performance metrics are all essential, but true value lies in the insights hidden behind these figures. These insights can reveal much more than compliance or...
Year-End Closing Chaos? How to Turn Dread into Done!
Does the phrase "year-end closing" send chills down your spine? You’re not alone! For many business owners, accountants, and financial teams, this crucial time of year is riddled with challenges and stress. However, with the right strategies in place, the chaos of the...
Stand Out or Fade Away: Develop a Winning Brand Identity
To truly thrive, a company must stand out from the crowd and create a lasting impression on customers. But how exactly do you make your offerings distinctive in a sea of competition?
Are You Ready for the New 401(k) Law?
The SECURE 2.0 Act, effective starting in 2025, is a massive piece of legislation that makes over 90 changes to retirement plan and tax regulations. Among other things, the Secure 2.0 Act brings several important changes to 401(k) retirement plans. This new law...
Maximize Your Return on Invested Capital
ROIC measures how efficiently a company uses its capital to generate profits. It answers the fundamental question: “Are we getting the best possible returns for the capital we’ve invested in the business?”
How Ignorance of HR Laws Can Destroy Your Business
The stakes are high for business owners who neglect HR laws. The financial and reputational damage from a lawsuit can be irreparable.