Importance of Cash Flow Planning to Come Out of Covid 19 in a Position of Strength

Good Afternoon,

I hope you and your families are doing well and are healthy. I have fully adapted to the new norm of Zoom calls and I am grateful for the extra time I am getting with my family. However, I am hopeful to be able to return to the office and begin interacting face to face with people soon. Someone recently asked me what the most important area of focus is for businesses right now and I firmly believe it is strong leadership and quantifying and projecting your cash flow.

Leadership is more important than ever this year
Leadership is about doing the right things, which is more critical than ever in these times. As a Firm, we have much to offer in the area of Leadership, and we are interested in further exploring potential Leadership Advisory Support services with you. Specifically, we are interested in helping you and perhaps others Clarify & Simplify top Priorities to enhance Focus, Organization, Communication, Execution, and Innovation with respect to those key initiatives. We are very good at this and we are interested in trying to help if you are receptive.

Profits & Cash Flows are also very important this year
Most businesses fail to sufficiently quantify the implications of their decisions, and it costs them millions, which I believe is the essence of a quote by Michael Gerber. If you haven’t already done this, I highly recommend that you look closely at your cash flow and prepare a cash flow projection. A few key areas to think about:

1) Build up Cash. You should seek to understand your cash and working capital needs. I would encourage you to analyze your customers (allocation risk and creditworthiness), billing processes, your accounts receivable assumptions and collections, and your outflows for expenses and debt service. Historic data may not be as relevant now as income is down and collections could be slower. For example, you need to quantify what an extra 15 days of receivables could mean to your cash flow. I would also encourage you to look at ways to preserve and build up some cash.
2) Reduce unnecessary costs and manage expenses. Look at ways of reducing cash without impacting revenues. Review all costs and understand and quantify what costs you truly need right now. Negotiate credit terms.
3) Your bankers can be really good friends during this time. Need to understand and communicate with them and review your debt agreements and understand the terms and covenants. Look for ways to build cash through loans or lines of credit.

As a Firm, we also have much to offer in the area of profits & cash flows, and we are interested in further exploring potential Financial Advisory Support services with you. Specifically, we are interested in helping you in the areas of Profit & Cash Flow planning, enhancement, and analysis. This might include potential analysis around the ramifications from the Virus, including profit & cash flow planning and stress-testing various scenarios. So, if we can be of service to you in any way right now to build out some cash flow projections and provide some answers and possibly some peace of mind please let me know.

Regards,
Jeffrey W. Mitchell, Jr, CPA, MT | Senior Vice President
Siegfried Advisory, LLC